The BIG Picture

North American equity markets continue to push to record highs, bolstered by a promising start to the U.S. third-quarter earnings season.

It has been a busy few weeks with several issues garnering investor attention. The U.S. jobs report has taken on more importance given the Federal Reserve’s admission that it is watching it more closely.

A continued decline in inflationary pressures, coupled with ongoing signs of a cooling Canadian economy, prompted the Bank of Canada (BoC) to make its third consecutive interest rate cut this week.

It has been an eventful few weeks. The Bank of Canada cut interest rates for the second consecutive time. Meanwhile, global equities have been weaker, driven by a sector rotation rather than broad market weakness.

Canadian and European equities have been weaker in recent weeks, though year-to-date gains remain respectable. Meanwhile the U.S. equity market continues to display strength, driven by the large cap technology sector.

May has been a noticeably better month for markets.  A weaker pace of job growth and inflation numbers have rekindled hopes that the U.S. Federal Reserve may start cutting interest rates in the second half of the year.

The past few weeks have seen more meaningful activity across global equity marked by an increase in volatility. Two developments were particularly noteworthy.

Global equity markets have been somewhat directionless over the past few weeks, likely taking a breather after a reasonably good first quarter.

Global equity markets have come out swinging start to the year. U.S. economic data has exceeded expectations, with the latest inflation reading suggesting a modest uptick in price pressures.