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(Bloomberg) -- Looser regulation in the US is poised to outweigh the threat of hefty tariffs when it comes to the outlook for Canadian equities next year, according to AGF Investments Inc.

The Toronto-based firm says the macro picture in Canada improved this year and may brighten further in 2025. The S&P/TSX Composite Index has risen 22% so far in 2024, setting more than 40 all-time highs, and is on pace for its best year since 2009. The Canadian stocks gauge also outstripped the S&P 500 Index in every month from July onward after trailing the US benchmark in the first half.

“We see a solid runway for Canadian stocks in 2025, supported by valuation upside and the potential for stronger global growth to propel cyclical sectors higher,” Mike Archibald, an AGF portfolio manager, wrote in a report Tuesday.

AGF, which manages C$51.5 billion ($36.6 billion) in assets, expects global economic growth will spur the performance of cyclical stocks, which are heavily weighted in the Toronto index. That’s in spite of US President-elect Donald Trump’s promise to hit Canadian exports with 25% tariffs.

“Despite tariffs and other unknowns related to the political environment in the US, the Canadian economy is in a much better position than it was a year ago, and earnings growth suggests the TSX has decent upside from here,” Archibald said.

He expects all 11 industry groups in Canada to expand in 2025 compared to 2024. This year saw one sector fall, communications services, which has tumbled almost 17% so far amid rising competition in the wireless space.

“Areas like financials, industrials and commodities stand to potentially benefit from a return to trend in long-term GDP growth, and these groups account for 75% of the TSX,” Archibald said.

Still, Trump’s erratic follow-through on promises leaves an air of uncertainty, especially for markets he’s been targeting.

“A second term could see continued pressure on Canada’s trade surplus with the US, particularly in sectors like automotive and agriculture,” Archibald said.

So far though, Canadian stock performance has defied the Trump tariff threat.

“Canada’s market is currently the top performer among the 20 major equity markets (in local currency terms) since Trump’s election and was already the second-best performer from the start of the quarter leading up to his election, trailing only Taiwan,” Gillian Wolff, a Bloomberg Intelligence analyst, wrote Tuesday.