To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 2.9%; the U.S. Dow Jones Index finishing up 4.9%; and the U.S. S&P 500 finishing up 4.7%.
Last week I wrote about the historically noteworthy reversal (more than 1,300 points) of the Dow Jones Index on Thursday when, on poor inflation data, it declined more than 500 points on the open only to subsequently finish 800 points higher for the day. I said I didn’t want to be too definitive, but such reversals – on bad news mind you – can often be seen as “the” turning point when viewed in retrospect months or years later. I still don’t want to be definitive, but it’s interesting to note the follow-through strength in markets this week as seen in my traditional opening sentence recounting the weekly market returns.
I’m pressed for time this week, so I’ll just make a few quick points about corporate earnings. Q3 earnings reports have been pretty good thus far, especially among big banks and investment firms. There have also been bright spots in the Consumer Staples sector and the defense industry. But it’s very early days. Without doubt, there will be a number of hiccups and misses in a variety of sectors given the high-profile earnings warnings that occurred before the reporting season began. This would be normal considering the economic headwinds.
Adding a bit more color to my description of the earnings season thus far, I’d further note that the magnitude of Q3 earnings beats are lagging the historical averages, while revenue beats are a bit higher than the pre-pandemic norm. In other words, it’s not all doom and gloom when it comes to corporate earnings (although, without a doubt, consensus estimates for next year’s earnings will still have to come down, but I’d argue that is well known by market participants… the need for such has certainly been extensively discussed in internal comments here at RBC, and likewise I’ve seen broad awareness in the business and financial press as well).
Last note in earnings: next week will be very interesting as the big tech bellwethers (Apple, Google, Amazon et al) all report. We shall see how it goes.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
Visit Our Website: www.nickscholte.ca
We accept new clients primarily by referral from our existing clients. If you have family or friends who would be a good fit for our specialized wealth management services, please let us know.
Any recommendations herein are for the exclusive use of clients of RBC Dominion Securities and Investment Advisor Nick Scholte. Any other direct or indirect recipient of this email should consult with his/her own licensed investment advisor prior to implementing any investment action he/she may be contemplating.