The median forecast in a survey of more than 20 portfolio managers and strategists was for the S&P/TSX Composite index to rise nearly 8% to 18,400 by the end of 2021. That was higher than the 18,000 forecast in August's poll, and would surpass February's record high of 17,970.51.
The index has rebounded from an eight-year low in March at 11,172.73.
"The run-up in stocks will likely not end in 2021 as (U.S.) stimulus likely comes early in the new year, vaccines start to get distributed in the second half of the year and most companies go back to normal in the latter part of 2021," said Sadiq Adatia, chief investment officer at Sun Life Global Investments.
Investors are hoping for progress in Washington in talks to craft a new fiscal relief package, while the recent surge in global coronavirus cases has been offset by encouraging news from a number of major drugmakers on the effectiveness of their candidate vaccines.
When asked if their forecasts were based on recent vaccine progress, three quarters of the poll's respondents said they were.
A vaccine rollout would "benefit Canada more than most countries because of the large proportion of value and cyclical stocks on the TSX," said Matt Skipp, president of SW8 Asset Management.
Cyclical stocks tend to be sensitive to the economic cycle. They include financial and resource stocks, which account for more than 50% of the TSX's valuation.
Pent-up demand should result in a surge in economic activity in the second half of 2021, according to Mike Archibald, a portfolio manager at AGF Investments.
"Energy demand should return to more normal levels, helping the Canadian energy sector, and improving activity should result in better conditions for the Canadian banks," he said.
The TSX is expected to end 2020 at 17,100, barely changed from its current level.
The index is less expensive than some others, with a higher weighting in technology or other sectors more favored by investors during the pandemic. Its price-to-earnings ratio is about 13, using forward-looking earnings estimates, compared to 22.4 for the S&P 500, I/B/E/S data from Refinitiv showed.
A slight majority of contributors forecast earnings would return roughly to pre-COVID-19 levels within a year or earlier.
"Rebounding corporate earnings, along with ongoing monetary policy stimulus and fiscal stimulus, will continue to provide broad support," said Angelo Kourkafas, investment strategy analyst at Edward Jones.
(Other stories from the Reuters Q4 global stock markets poll package:)
(Reporting by Fergal Smith with additional polling by Manjul Paul and Richa Rebello in Bengaluru Editing by Ross Finley/Mark Heinrich)
By Fergal Smith