Canada’s resources sectors have overtaken financials as the heavyweights of its main equity index for the first time since August 2020 as oil and metal prices rally and global banks slump.

Energy and materials companies now constitute about 31.07% of the S&P/TSX Composite Index, surpassing Canada’s banks, insurers and asset managers, which have a 30.9% weighting. Enbridge, which has gained 18% this year, has the third-biggest weighting on the benchmark, while Canadian Natural Resources ranks in sixth place.

“It’s good news for the TSX,” said Greg Taylor, chief investment officer at Purpose Investments. “The energy companies that survived the days of ESG are coming out with better balance sheets and as much better operators, and they’re set up to do really well in this high commodity price environment.”

Oil and metals stocks have been on a tear this year as investors sought haven assets with markets reeling from a tight oil market, economic growth uncertainty and a rising interest-rate environment. That propelled the TSX to several record highs in March.

Bank stocks, on the other hand, have been held back for all the same reasons as the US Federal Reserve, Bank of Canada and other central banks plan to aggressively tighten monetary policy to temper surging inflation.

The S&P/TSX Energy Sector Index has rallied 34% this year and the S&P/TSX Materials Index climbed 26%, while financials have dropped 1.4%. Copper miner Turquoise Hill Resources and oil and gas producer Vermilion Energy are leading gains on the benchmark, soaring 79% and 73% respectively this year. Meanwhile, financials erased their strong start to the year, with four of the Big Six banks turning negative this month. CI Financial Corp. is leading losses in the sector, tumbling 31%.

The reversal in sector weightings could be a boon for the Canadian stock market this year as investors seek companies that stand to benefit from volatile global sentiment. At one point this month the Canadian benchmark had outperformed the S&P 500 by the widest gap in a quarter in 13 years.

“The TSX is heavy on commodities and light on technology and health care versus the US markets,” Taylor said. “With technology stocks under pressure with rising interest rates, this could be a great environment for the TSX to outperform.”