In a holiday-shortened week, stocks gyrated around the flat line in the U.S., while Canadian stocks finished higher. Weakness in the health care sector as a reaction to increasing U.S. political headlines was offset by healthy gains in industrial stocks, driven by solid earnings and better-than-expected manufacturing data from China. With valuations having rebounded back to historical averages for both the TSX and the S&P, major indexes are now trading near all-time highs. We think corporate earnings will likely be the key to driving markets higher for the balance of the year. With about one-third of the companies in the S&P 500 reporting first-quarter results this week, investors will have plenty to digest. Earnings reports can prompt volatility in individual stocks. Owning a sufficient number of stocks in your portfolio can help reduce this volatility.
When riding a rollercoaster, you go up, you go down, and you end up back where you started. Over the past seven months, the stock market has traveled a similar path. The TSX has reached a new high and the S&P 500 is essentially back to its peak of last September, sitting just slightly more than half a percent from an all-time high. With investors strapped in for the ride, which included a sizable pullback late last year and historically strong gains to start 2019, we'd note five important takeaways for investors:
We think there is still more upward track ahead for this bull market, but investors should expect more twists and turns as we advance. With the stock market having returned to the same perch it occupied before the late-2018 drama, it's useful to consider what's changed…
Craig Fehr, CFA
Sources: 1. Bloomberg, 2. Bloomberg S&P 500 consensus earnings estimates, 3. Factset, Edward Jones calculations
|S&P 500 Index||2,905||-0.1%||15.9%|
|10-yr GoC Yield||
: Bloomberg, 04/18/19. *5-day performance ending Thursday. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.
The earnings season will take center stage this week, with about one-third of the companies in the S&P 500 reporting first-quarter results. Economic data will be light on the week in Canada, with the Bank of Canada's rate decision being the main event. Exchanges across Europe will be closed on Monday as part of the Easter weekend.
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Diversification does not guarantee a profit or protect against loss.
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