Top 10 Best Performing Canadian ETFs 2026

The Canadian financial landscape has undergone a profound transformation throughout 2025 and the first quarter of 2026, characterized by a decisive rotation away from the high-valuation growth sectors of the United States and toward the resource-intensive, value-driven equity markets of the Toronto Stock Exchange. By February 2026, the S&P/TSX Composite Index reached unprecedented historic highs, driven by a confluence of geopolitical instability, structural shifts in global central bank reserves, and the emergence of a localized commodity super-cycle. This report provides an exhaustive, expert-level analysis of the ten best-performing exchange-traded funds (ETFs) in Canada based on trailing one-year total return data, contextualizing their success within the broader macroeconomic environment of rising commodity demand and shifting monetary policy.

The Macroeconomic Drivers of the 2025-2026 Canadian Market Rally

The standout performance of Canadian equities in the twelve months leading up to February 2026 was not a result of isolated market anomalies but rather the alignment of the index’s core exposures with a global environment of persistent inflation and geopolitical friction. While the Morningstar US Market Index returned approximately 15% in 2025, the Morningstar Canada Index soared by over 29%, a divergence that underscores the shifting preference for tangible assets and defensive factor profiles.

The primary catalyst for this rally was the basic materials sector, which witnessed an appreciation of more than 88% during the observation period. This surge was underpinned by a historic rush into gold as a safe-haven asset, with futures for the yellow metal surpassing $4,000 per ounce in late 2025 and challenging the $5,000 mark by early 2026. Furthermore, the industrial sector benefited from the massive infrastructure requirements of the global artificial intelligence buildout, which created a relentless demand for copper and other base metals necessary for power generation and data center expansion.

Simultaneously, the energy sector realized significant gains as the Trans Mountain Expansion improved realized prices for Canadian producers, enhancing corporate margins and free cash flow. This was complemented by a supportive domestic monetary policy, where the Bank of Canada lowered its policy rate to 2.25% by early 2026, mitigating housing market tail risks and stabilizing the financial sector. In this environment, investors transitioned from “growth-at-any-price” strategies toward assets offering high dividend yields, capital discipline, and structural resilience.

Review of the Top 10 Performing Canadian ETFs

The following ETFs are analyzed based on their total return performance, operational efficiency, and strategic suitability for institutional and sophisticated retail portfolios. The selection focuses on non-leveraged instruments that represent the dominant investment themes of the current cycle.

1. iShares S&P/TSX Global Gold Index ETF (XGD)

The iShares S&P/TSX Global Gold Index ETF (XGD) has emerged as the unequivocal leader of the Canadian market rally, posting a trailing one-year total return of 129.91% as of late February 2026.

As a specialized instrument designed to track the S&P/TSX Global Gold Index, XGD provides investors with concentrated exposure to the world’s largest and most liquid gold mining corporations. The fund serves as a powerful proxy for the price of gold, albeit with the inherent operational leverage associated with the extraction industry. The fund’s performance has been fueled by a “catalyst-rich environment” characterized by aggressive central bank accumulation—purchasing 863 tonnes of gold in 2025—and a decisive return of Western institutional investors to the precious metals space after years of under-allocation.

XGD is most suitable for a tactical momentum investment style or as a structural hedge within a diversified portfolio. Its risk profile is elevated, as evidenced by a 3-year standard deviation of 30.87, yet its ability to deliver positive returns during major geopolitical risk events makes it a critical defensive asset. The fund manages approximately $4.52 billion in net assets and carries a management expense ratio (MER) of 0.60%. The portfolio is highly concentrated in industry giants, with Newmont Corp (16.16%), Agnico Eagle Mines Ltd (13.21%), and Barrick Mining Corp (9.70%) comprising the top holdings.

2. BMO Equal Weight Global Base Metals Hedged to CAD Index ETF (ZMT)

The BMO Equal Weight Global Base Metals Hedged to CAD Index ETF (ZMT) has capitalized on the industrial transformation necessitated by the global transition to renewable energy and the expansion of digital infrastructure.

ZMT provides a diversified entry point into the global base metals sector, including aluminum, copper, and nickel producers. By employing an equal-weight methodology, the fund mitigates the concentration risk found in market-cap-weighted indices, ensuring that performance is driven by a broader spectrum of industry players rather than just a few mega-cap entities. In January 2026 alone, ZMT led the natural resources equity category with a 16.12% monthly gain, reflecting the acute upward pressure on commodity prices.

This ETF is tailored for a pro-cyclical investment style, catering to those who anticipate a prolonged commodity super-cycle. It is particularly effective for Canadian investors due to its currency hedge, which neutralizes the volatility of the U.S. dollar. The fund operates with an expense ratio of 0.61%. As the world continues to electrify its economies, the scarcity value of the industrial inputs held within ZMT’s portfolio remains a primary driver of its capital appreciation.

3. Global X Copper Producers Index ETF (COPP)

Focused specifically on the “red metal,” the Global X Copper Producers Index ETF (COPP) has benefited from the narrative that copper is the “new oil” of the 21st century.

COPP tracks the Solactive North American Listed Copper Producers Index, providing targeted exposure to companies engaged in the mining of copper ore. The fund returned 14.78% in January 2026, outperforming the average natural resources fund return of 11.62%. This performance is a direct reflection of copper prices reaching $13,000 per tonne, driven by a decade of supply-side underinvestment and the massive power requirements of AI infrastructure.

COPP is suitable for thematic growth investors who seek to isolate the “electrification” trade. Its investment mandate includes hedging U.S. dollar exposure back to the Canadian dollar, providing a cleaner play on the underlying miners. With an expense ratio of 0.79% and net assets of $140.7 million, it remains a high-conviction vehicle for capturing the supply-demand imbalance in the copper market. Key holdings include Southern Copper Corp, Lundin Mining Corp, and Freeport-McMoRan Inc.

4. BMO Junior Gold Index ETF (ZJG)

For investors seeking to amplify the returns of the gold bull market, the BMO Junior Gold Index ETF (ZJG) offers high-beta exposure through small and mid-cap mining companies.

ZJG provides access to the “junior” segment of the gold industry—companies that are often in the development phase or possess smaller operational footprints than senior producers. These firms typically exhibit higher sensitivity to gold price movements, as their earnings and asset valuations are more volatile. The fund returned 9.22% in January 2026 and was recognized as one of the standout performers of 2025.

ZJG is appropriate for an aggressive alpha-seeking investment style. It functions as a tactical overlay for investors who already have core exposure to large-cap miners but wish to capture the “catch-up” growth potential of smaller explorers. The ETF carries an MER of 0.61% and remains a favorite for traders looking to leverage the forecasted rise of gold toward $6,000 per ounce in the long term.

5. BMO MSCI Emerging Markets Index ETF (ZEM)

The BMO MSCI Emerging Markets Index ETF (ZEM) serves as a testament to the global rotation away from the technology-heavy U.S. market and toward undervalued international regions.

ZEM offers broad exposure to large and mid-capitalization stocks across 24 emerging markets, employing a market-cap-weighted methodology with a selective ESG tilt. The fund achieved a one-year return of 28.73% as of late 2025, significantly outperforming many of its developed-market peers. This outperformance was driven by capital inflows seeking attractive valuations and the widespread adoption of new technologies in non-Western markets.

ZEM is best suited for a value-oriented diversification style. It allows investors to benefit from the fiscal expansion of developing nations while hedging against a potentially weaker U.S. dollar. With a relatively low expense ratio for the category, ZEM has become a cornerstone for institutional portfolios looking to “normalize” global equity weightings after a decade of North American dominance.

6. BMO Covered Call Canadian Banks ETF (ZWB)

The BMO Covered Call Canadian Banks ETF (ZWB) represents the intersection of the TSX’s financial strength and the growing investor demand for enhanced income streams.

ZWB invests in a portfolio of Canada’s “Big Six” banks while selling call options on a portion of the holdings. This covered call strategy generates additional monthly distributions and provides a buffer against moderate market declines. The fund delivered a total return of 27.69% over the past year. This performance was supported by strong capital positions within the Canadian banking sector and the Bank of Canada’s easing cycle, which improved credit outlooks and fueled bank profitability.

Suitable for an “income and carry” investment style, ZWB is ideal for investors who are constructive on the Canadian financial sector but wish to mitigate the volatility of a “beta” play. The fund’s annualized distribution yield reached 28.9% in early 2026, making it one of the most attractive yield instruments for domestic investors.

7. BMO Covered Call Technology ETF (ZWT)

Despite the broader rotation away from pure growth sectors, the BMO Covered Call Technology ETF (ZWT) demonstrated that a structured approach can yield significant results even in a consolidative technology environment.

ZWT provides exposure to a portfolio of leading global technology stocks while utilizing a covered call strategy to harvest volatility premiums. In a year where technology stocks were beset by “AI-related fatigue” and “stretched valuations,” the income generated by the option premiums provided a critical component of the fund’s 26.69% annual total return.

ZWT is appropriate for a “defensive growth” investment style. It is designed for investors who believe in the long-term fundamentals of the technology sector but expect a sideways or range-bound market as capital rotates into cheaper segments like healthcare and financials. The fund’s inception in 2021 was well-timed to capture the transition toward more mature, yield-generating technology strategies.

8. BMO MSCI EAFE Index ETF (ZEA)

The BMO MSCI EAFE Index ETF (ZEA) offers Canadian investors exposure to developed markets across Europe, Australasia, and the Far East, providing a vital counterweight to North American concentration.

ZEA tracks an index of large and mid-cap stocks in international developed markets. Over the trailing twelve-month period, the fund returned 23.57%. This performance was bolstered by stable economic expansions in Europe and appealing valuations that looked significantly “cheap” relative to the S&P 500. The finalization of new trade agreements and a reduction in geopolitical risk premiums in the Eurozone further supported the index.

This ETF is suitable for a core international diversification style. It is an essential tool for institutional investors who seek to participate in global sector leadership while avoiding the concentration risks inherent in the technology-heavy U.S. indices. ZEA’s efficiency and broad market coverage have earned it a central role in balanced portfolio construction.

9. iShares Canadian Growth Index ETF (XCG)

The iShares Canadian Growth Index ETF (XCG) has redefined “growth” for the modern Canadian investor by focusing on companies that combine rapid expansion with the structural tailwinds of the domestic economy.

XCG provides exposure to large and mid-sized Canadian companies that exhibit high growth characteristics. Unlike U.S. growth indices, which are dominated by software and communications, XCG’s portfolio often includes high-performing industrials, financial innovators, and advanced materials producers. The fund delivered a one-year return of 21.69%, significantly outpacing the broader market.

XCG is suited for a “style-pure” Canadian equity investment mandate. It appeals to investors who want to capture the “TSX Renaissance” through a lens that prioritizes earnings momentum and upward revisions. With a management fee of 0.50% and an MER of 0.55%, it remains a cost-effective vehicle for thematic domestic exposure.

10. Vanguard FTSE Canada All Cap Index ETF (VCN)

The Vanguard FTSE Canada All Cap Index ETF (VCN) serves as the benchmark for the total Canadian equity experience, capturing the full breadth of the market’s record-breaking performance.

VCN provides comprehensive exposure to the Canadian stock market, holding nearly every listed security from mega-cap banks to small-cap mining explorers. The fund’s one-year return of 21.63% reflects the broad-based nature of the Canadian rally, where strength was found across the materials, energy, and financial sectors.

VCN is the quintessential “passive core” investment. It is designed for long-term holders who seek the lowest possible cost of ownership—with an MER of just 0.05%—while maintaining full market participation. Its efficiency and “all-cap” scope ensure that investors do not miss out on the outsized gains often seen in the small-cap resource segment during commodity booms.

Performance Summary Table

The following table provides a comparative overview of the top 10 ETFs by one-year performance and key operational metrics.

*Performance for ZMT, COPP, and ZJG is estimated based on sector-level performance and monthly data provided in February 2026 reports.

Analytical Synthesis and Second-Order Insights

The extraordinary performance of these ETFs in 2025 and 2026 suggests a fundamental shift in the “reaction function” of the Canadian market to global macroeconomic signals.

Redefining the “Growth” Factor

Historically, the Canadian market was viewed as a “value” play that lacked the hyper-growth potential of the U.S. technology sector. However, the 2025-2026 cycle has seen a redefinition of the growth factor. In an era of high interest rates and persistent inflation, growth is increasingly synonymous with “resource security” and “cash-flow reliability”. The multiple expansion observed in the TSX—where stock prices rose faster than earnings—indicates that investors are now willing to pay a premium for assets that offer protection against currency debasement and geopolitical risk.

The AI-Commodity Feedback Loop

A critical insight for the 2026 investor is the recognition that the AI revolution is as much a hardware and resource trade as it is a software story. The massive performance of COPP and ZMT is intrinsically linked to the “massive power demand” of AI data centers. As the link between power generation and AI infrastructure becomes more critical, the commodity super-cycle theme will likely remain a dominant feature of the market. This feedback loop creates a structural floor for base metal prices, insulating them from traditional cyclical downturns.

The Catch-Up Mode of Mining Equities

Despite the triple-digit gains in XGD, evidence suggests that mining equities are still in “catch-up mode” relative to the spot price of gold. Historically, gold mining equities have been valued using gold price assumptions that lag the actual market price. As analysts began to gain confidence in late 2025 that $4,000+ gold was sustainable, they initiated a sector-wide re-rating. This suggest that the “long-overdue” re-rating of gold miners could sustain momentum into late 2026 and 2027, even if gold prices themselves enter a period of consolidation.

The Rise of Structured Yield

The success of ZWB and ZWT underscores a major trend in Canadian ETF implementation: the migration toward “structured yield.” In a volatile environment where headline risks can cause overnight market swings, investors are increasingly favoring covered call strategies that “harvest” volatility to generate distributions. This strategy is particularly effective for Canadian bank stocks, which possess the strong capital positions and revenue diversification necessary to support a yield-enhanced model.

Future Outlook: Risks and Opportunities for Late 2026

While the Canadian market enters 2026 with “meaningful tailwinds,” several risks are beginning to emerge that could influence ETF performance in the coming quarters.

Trade Policy and CUSMA 2.0

The upcoming “CUSMA 2.0” negotiations are expected to introduce significant “chop” into the Canadian asset space. Tariffs and shifting U.S. trade dynamics remain a persistent threat to Canadian export-oriented sectors. However, the TSX’s heavy concentration in materials and energy—which are globally demanded commodities—provides a level of insulation against localized trade disputes.

Inflation and the “Term Premium”

With inflation set to remain above the 2% target throughout 2026, central banks in developed nations have reached the end of their easing cycles. This has led to an increase in “term premiums,” skewing the risk toward higher yields as the year progresses. For investors, this environment favors “float over fixed” in the bond sleeve and “value over growth” in the equity sleeve, further supporting the case for the commodity-heavy Canadian market.

Currency Dynamics

The USD/CAD cross-rate will remain a critical variable. Early 2026 projections suggest a “downside risk” to the USD/CAD pair, meaning the loonie could strengthen relative to the greenback. This would potentially dampen the returns of unhedged international ETFs for Canadian holders, making the CAD-hedged versions of ZMT, COPP, and ZEA more attractive tactical choices.

Strategic Conclusions

The review of the top 10 Canadian ETFs in 2026 reveals a market that has successfully navigated the transition from a decade of disinflationary growth to a new era of structural scarcity and geopolitical complexity. For professional investors, the key takeaways are as follows:

1. Embrace Tangible Assets: The structural necessity of gold and base metals in diversified portfolios has been validated by the performance of XGD, ZMT, and COPP. These are no longer merely “insurance hedges” but core growth drivers.
2. Utilize Yield Enhancement: Covered call strategies (ZWB, ZWT) have proven their worth in volatile, range-bound markets, providing a superior risk-adjusted return compared to pure beta plays.
3. Diversify Away from US Concentration: The rotation into EAFE (ZEA) and Emerging Markets (ZEM) reflects a necessary normalization of global equity weightings as U.S. valuations remain stretched.
4. Monitor the AI-Power Nexus: The industrial requirement for power infrastructure is the “silent partner” in the AI story, providing a durable foundation for the materials sector.

As the global economy settles into a “late-cycle” dynamic, the Canadian market—with its unique blend of resource security, financial stability, and attractive dividend yields—is well-positioned to continue its streak of relative outperformance.