Here’s a new stock market adage for investors to keep in mind: When America closes, Canada dozes.
On the occasional days of the year when U.S. markets shut up shop for holidays while traders in Canada keep working — think American Thanksgiving, Memorial Day and Martin Luther King Jr. Day — the Toronto Stock Exchange can feel listless. That’s because, increasingly, it is.
Going back to the 1980s, there’s a long-term trend toward more subdued movements in the S&P/TSX Composite Index when the S&P 500 is on a break, according to our own analysis of the trading data. In the decade of the ’80s, the typical daily move in the TSX benchmark index when U.S. markets were closed was nearly 91% of what it was when the U.S. was open. That fell to 65.5% in the 2010s. In the first half of this decade, it has dropped to 54.1%.
The temporary TSX hibernation extends to volumes, too. Between 2014 and 2024, trading volumes in Canada were 58% lower on U.S. Thanksgiving (which falls on a Thursday) versus the monthly average, according to BMO Capital Markets.
This all fits with research showing a general trend of stock prices moving in increased synchronicity in recent decades, particularly in international markets, says Bing Han, a professor of finance at the University of Toronto’s Rotman School of Management, pointing to the rise of globalization and financial integration. “Some studies argue that the U.S. market is a more important driver of other countries’ stock returns than local factors,” he says. “When the U.S. market is closed, there’s little news flow and no price discovery, so Canadian markets can drift aimlessly during such periods.”
Likewise, portfolio managers have boosted their U.S. exposure over time. “Canadian money managers are now much more heavily invested in the U.S. than they used to be, so when the U.S. markets are closed, a lot of money managers are also using it as a vacation day,” says Alexander MacDonald, a portfolio manager with Focus Wealth Management.
There’s one upside to all this: Since the ’80s, on days when U.S. exchanges were closed, the TSX ended in the green more than 72% of the time, compared to 54% when the S&P 500 was active—albeit with a modest average gain of 0.25%.