- Our Thoughts: Spring Forward: Solid earnings amid choppy markets
- By the numbers: April
- David Chilton on Estate Planning
- Other Things: Disruptors podcast, Global Insight Monthly, Web Security Blog Post & Canadian Tulip Festival
Our Thoughts: Spring Forward: Solid earnings amid choppy markets
As the weather improves and we all yearn for summer, we remain positive on the economic outlook following a solid earnings season. On the topic of the “future”, we are also excited to share that Peter & his wife Breanne are expecting their second child in June!
Equity markets finished the month of April a bit lower as they digested the gains made since last October. Markets largely spent the month grappling with sticky inflation, which meant diminishing prospects for early interest rate cuts in the U.S.. In the past week, policymakers at the U.S. central bank acknowledged these challenges, contrasting with other regions where officials continue to telegraph upcoming rate cuts. Below, we offer insights from the first quarter earnings season, which is nearing its completion.
Overall, corporate earnings results have been solid. The first quarter earnings in the U.S. are on track to grow by nearly 5% year-over-year, surpassing expectations. Management commentary has been predictably mixed. On the plus side, some leaders have highlighted resilient consumer demand, strong backlogs, and tailwinds from reshoring activity. Others have pointed to higher interest rates, geopolitical tensions, sluggish growth in China, and a strong U.S. dollar as key challenges.
As in recent quarters, most of the U.S. earnings growth has been driven by some of the largest stocks. Prior to earnings season, the “Magnificent Seven” group of technology-related stocks were expected to see earnings-per-share (EPS) growth just shy of 40%, while the rest of the S&P 500 was projected to see an earnings decline. On average, the large tech companies have exceeded expectations but experienced muted stock price reactions in response to the results.
Meanwhile, the “rest” of the market is expected to see an acceleration in earnings growth. Outside of tech, earnings have been suppressed over the past year by cyclical factors such as higher costs, borrowing rates, and economic uncertainty among other things. However, with growing conviction in the resilience and strength of the U.S. economy, forecasts suggest earnings will accelerate, and in certain areas, outpace the tech sector for the first time in a while.
We welcome the potential for a broadening of earnings growth and would see it as a healthy development for the equity market. Nevertheless, a shift in earnings momentum between tech and everything else could potentially lead to some changes in market leadership and bouts of higher volatility, even if temporary. Whether that transpires or not, our clients’ equity portfolios remain well-diversified, making us confident in their ability to perform, regardless of which sector or group of stocks leads the way.
By the numbers (April): The TSX was down 1.8% and the S&P 500 was down 4.1% in U.S. dollars (2.4% in $CAD). The Europe, Australia & Far East index (EAFE) was down 1.1%, while the Emerging Markets index was up 2.3%. The Canadian bond market was down 2%.
“The Wealthy Barber” David Chilton, Shares Advice on Estate Planning: Please find below the links to David Chilton’s 2 new videos on Estate Planning on what’s changed and what hasn’t. David shares his thoughts on the elements of estate planning that have stood the test of time, and why he believes Executors should turn to the professionals for help.
Enjoy the videos here in either English or French by clicking on your preferred language choice:
- “The Wealthy Barber’s ageless estate planning advice”: EN | FR
- “The Wealthy Barber: Settling estates and being an executor is becoming more complicated”: EN | FR
Should you have any questions/comments or wish to book some time to review your own estate plan, please let me know and I would be happy to share any resources we have or book a free consultation with Royal Trust.
Interesting Listening/Reading
- Disruptors - A dynamic 30 min RBC podcast co-hosted by John Stackhouse and Trinh Theresa Do about reimagining Canada’s economy in a time of unprecedented change.
- Building Blocks: Solving the Supply Shortage with Prefabricated Homes
- AI is Disrupting Canada’s Labour Landscape
- To check out our Global Insight Monthly for April find the link here.
- The five flags "watch list": Protecting our most vulnerable : a quick read on helping to safeguard elderly family members against digital scams and fraud.
Canadian Tulip Festival runs May 10-20th– check out more info here. Including the fun “TulipTV” spotlight which might be enjoyable for kids/grandkids.
Regards,
Mark, Peter, Sarah, Corinne and Nathalie
Gallivan Wealth Management
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