To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 0.9%; the U.S. Dow Jones Index finishing up 1.6%; and the U.S. S&P 500 finishing up 2.9%.
So after a brief pause last week, the up-trend in equities (stocks) resumed this week. Essentially markets have now recovered from the egregious excesses of the late 2018 sell-off, and I’d expect the up-trend to begin moderating from here on out. While a China/U.S. trade deal may lead to another burst of upside for the markets, it is likely the case that most of the benefits of any such deal may already be priced in. In an annual review with a client earlier this week, I suggested my guess is that the markets have probably priced-in about 2/3’s of any potential benefits. If anything, there may be downside risks pertaining to a trade deal insofar as a completed deal has yet to be achieved and there is still a possibility one may not come about. I assign a low probability to this negative outcome as I continue to think a trade deal is in the best interests of both countries as well as their respective leaders – but it’s a possibility.
In economic data, consumer confidence – which, not surprisingly, suffered during the late 2018 stock market drop – substantially improved in the March reading released today. So did retails sales which were reported on Monday. Since I rarely comment on these metrics, I’ll not get into the specifics of the data, other than to note that both readings substantially improved and exceeded the expectations of economists. While these data points are not as significant as the “big 3” I cite every month (those being the monthly Employment Report, ISM Manufacturing Index, and ISM “Services” Index), they are nonetheless widely followed, and probably occupy the tier of importance immediately below that of the Big 3.
And that’s about it for this week, because the messaging remains the same - that no credible threat of imminent recession looms. Stay the course.
All the best,
Nick Scholte, CIM, FCSI
Vice-President & Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
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