TORONTO, Aug 20 (Reuters) - Canada's main stock index is set to extend its record-setting rally in the coming months and through 2025 as lower borrowing costs offset the potential drag on corporate earnings from slower economic activity, a Reuters poll found.

The median prediction of 20 portfolio managers and strategists in the Aug. 8-20 poll was for the S&P/TSX Composite index (.GSPTSE) , opens new tab to advance 2.7% to 23,750 by end 2024, eclipsing the 22,500 expected in a May poll. On Monday, the index closed at 23,116.39, a record high.

The index is then expected to rise to 24,350 by end 2025, a gain of 5.3%, versus May's forecast of 24,300.

"We do not believe the bull market is over, and we would use any pullbacks, such as the one experienced in August, as opportunities to rebalance, diversify, and deploy fresh capital," said Angelo Kourkafas, a senior investment strategist at Edward Jones.

The commodity-linked TSX has advanced 10.3% since the start of the year, helped by record high gold prices and moves by major central banks, including the Bank of Canada, to lower borrowing costs.

Analysts say U.S. election uncertainty and a softer economic environment could be headwinds for the market in the coming months.

Canada's unemployment rate remained at a 30-month high of 6.4% in July, while the country's freight rail network could come to a grinding halt on Thursday unless labour agreements are reached.

"Corporate earnings will underperform expectations for the remainder of 2024 but investors will look past them because of falling interest rates," said Matt Skipp, president of SW8 Asset Management.

The Bank of Canada has cut its benchmark interest rate by 25 basis points twice since June, lowering the rate to 4.50%.

Investors expect nearly 200 basis points of additional easing by the end of 2025 and the U.S. Federal Reserve to begin cutting interest rates next month. ,

Of 15 analysts who answered a separate question, 10 said Canadian corporate earnings would underperform expectations for the rest of 2024.

Still, a slim majority, eight of 15, said a correction of 10% or more is unlikely for Canada's benchmark index by the end of September.

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

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https://www.reuters.com/markets/canadas-tsx-seen-higher-rate-cuts-preserve-bull-market-outlook-2024-08-20/