To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing up 0.3%; the U.S. Dow Jones Index down 0.5%; and the U.S. S&P 500 down 0.4%.
I’m pressed for time this week, so let me just state the obvious and acknowledge that the next three years are likely to be volatile ones for markets. As we saw earlier this week, President Trump is almost certain to continue roiling markets with threats that are often retracted or softened soon after. This time it was the threat of tariffs against eight European allies unless they supported Trump’s efforts to secure U.S. control of Greenland. What will it be next week? Next month? or the next three years? I don’t honestly know the specifics, but I do know there will be “something”. So, as unsettling as it may be, to remain invested is to acknowledge that these events will continue throughout the remainder of his presidential term.
But, in spite of these uncomfortable episodes, the U.S. economy remains on very sound footing, and corporate America even more so. A new quarterly earnings season has begun and, in the small sample size so far, earnings are accelerating from what was already an impressive growth rate the past two years. As I’ve often said, while stock valuations are certainly high by historical standards, the earnings growth rate, if maintained, can justify these valuations. And if the overall economy begins to meaningfully soften, the U.S. Federal Reserve has a significant amount of room to lower interest rates and support the economy. Bottom line: stay the course.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569
2950 Glen Drive, 7th Floor │ Coquitlam, BC │ V3B 0J1
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
Visit Our Website: www.nickscholte.ca
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