Canadian stocks rose with oil prices, and U.S. stocks edged higher on the week, adding on to the previous week's 2% rally, leaving the S&P 500 flat year-to-date. Stronger-than-expected earnings growth of 18% for the S&P 500 have helped stocks move higher, but potential causes of volatility, including additional tariff proposals and rising interest rates, continue to be headline risks. Through volatile markets it's important to take a long-term perspective and remember that market returns are driven by economic and earnings growth over time, and both appear positive, in our view.
The market has spent the last two months focused on worries of a trade war and swirling political uncertainties. Last week brought a welcome – and positive -- distraction as corporate earnings announcements grabbed the spotlight. Canadian and U.S. stocks posted gains on the week. The TSX remains in negative territory for the year and 6% below its record high, while the S&P 500 has now rebounded 3.5% from the April lows, pulling the U.S. market back near even for 2018 and within 7% of the January highs.
Policy and political concerns are not gone, nor is the volatility they'll spur as they jump in and out of the headlines. But our view that the broader bull market still has gas left in the tank is supported by the positive foundation of further economic and earnings growth, as last week demonstrated. Here are our key takeaways:
Source: 1. Factset Earnings Insight.
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The earnings season will take center stage next week, with more than one-third of the companies in the S&P 500 reporting first-quarter results. Economic data will be light on the week with wholesale trade sales being the only notable report.
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