The median forecast in a survey of 27 portfolio managers and strategists was for the S&P/TSX Composite index to rise 2.3% to 17,000 by the end of 2020 from a closing level of 16,617.48 on Tuesday, leaving it nearly unchanged for the year.

It is expected to climb further to 18,000 by the end of 2021, exceeding the record high it notched in February at 17,970.51. In March, the Toronto stock market plunged to its lowest level in more than eight years at 11,172.73.

"The road to full economic recovery is long, but a rebound in economic activity and corporate earnings over the remainder of the year and through 2021, along with ongoing monetary policy stimulus, provide broad support," said Angelo Kourkafas, an investment strategy analyst at Edward Jones.

Earnings for the TSX Composite are expected to grow by more than 34% in 2021, led by healthcare and consumer cyclical shares, after an estimated contraction of about 25% in the current year, I/B/E/S data from Refinitiv showed.

"We believe that a sustainable recovery is underway as the domestic economy gradually reopens," Kourkafas said.

A staggered reopening from lockdowns, supported by fiscal stimulus, is likely paying off for Canada's economy, with activity forecast to rebound in the current quarter twice as fast as in the United States, its biggest trading partner by far.

Improved prospects for growth could provide a boost to energy and financial shares, which tend to be sensitive to the economic cycle and account for more than 40% of the Toronto market's value.

"The TSX remains heavily geared towards financials and energy," said Dominique Lapointe, a senior economist at Laurentian Bank Securities, adding that for both sectors "the worst seems to be over and therefore we can only see a somewhat more constructive outlook in the coming months."

Oil has rebounded this month to as high as $43.52 a barrel after trading below zero in April, while gold notched in recent weeks a record high of $2,072.50 an ounce. The materials group, which includes precious and base metals miners, has rallied more than 26% this year, outpaced only by information technology.

"Commodity price action may continue to influence the TSX along with a possible Canadian snap election if it actually happens," said Colin Cieszynski, chief market strategist at SIA Wealth Management.

A crucial confidence vote on the Liberal Party government's COVID-19 economic recovery plan is expected in late September. Prime Minster Justin Trudeau needs the support of at least one of three opposition parties to stay in power.

(Other stories from the Reuters Q3 global stock markets poll:)

By Fergal Smith