TSX Today Canadian Stock Market Summary
Investors are still wary of inflation, but another investment professional said he thinks those fears may be already factored into market outlooks for next year. “I think that interest rate stability will lead to better returns in financials and utilities, and I think you need those two things to do well for the TSX to do well,” Harris said. “Current levels in stocks leave little room for disappointment and we wouldn’t be surprised to see a pullback at some point, and such a retracement would be normal in the overall bullish trajectory that we are in,” Schleif says. Investors are optimistic the market can maintain its mojo in April, which has historically been one of the strongest months of the year for the S&P 500.
Financials and utilities make up a significant portion of the index, Harris explained, noting that he thinks banks in particular are positioned for a good year in 2024. “While stocks are extended to the upside, this backdrop suggests pullbacks should be used as buying opportunities,” Turnquist says. Sam Millette, director of fixed income for Commonwealth Financial Network, says all indicators alpari broker review suggest initial estimates for first-quarter U.S. One of the most convincing signs that a soft landing is possible has been the resilience of the U.S. labor market. Bill Adams, chief economist for Comerica Bank, says there’s simply no denying the U.S. economy is in good shape. Reaching new all-time highs in March, the S&P 500 has finished its best first quarter since 2019.
- After starting the year as the most overvalued sector, energy is now one of the more undervalued sectors, following its underperformance for the year to date as oil prices have fallen.
- For example, shelter prices continue to rise, gaining 0.4% on a monthly basis and 5.7% on an annual basis in February.
- So far, we see the lowest percentage of firms discussing the election versus any of the past three cycles, with less than 10% of companies citing “election” in their Q4 earnings calls.
- Stocks look well positioned to outperform bonds and cash again this year, but high valuations mean investors need to be choosy.
We see particular opportunity among makers of the technology components that go into both EVs and advanced driver-assisted systems for all vehicles regardless of powertrain. Carol Schleif, chief investment officer at BMO Family Office, says investors shouldn’t necessarily be spooked if companies don’t live up to sky high expectations this earnings season. Investors will get their first meaningful feedback on the fourth quarter when big bank stocks Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) kick off earnings season and release their quarterly reports on April 12.
Market Outlook: What a ‘Return to Normal’ Means for Stocks
The bond market is currently pricing in a 95.8% chance the Federal Open Market Committee will continue to keep interest rates at their current levels at its next meeting, which concludes on May 1. Bond investors see a 63.6% chance the FOMC will begin cutting interest rates by June, according to CME Group. The Fed’s updated long-term economic projections are calling for three interest rate cuts of 25 basis points each by the end of 2024. Economists from TD Bank predict the tickmill review peak overnight rate will rise to 4.50% in the first quarter of 2023 before reaching neutrality by the end of that year and reaching the BoC’s goal of 2% by 2025. Meanwhile, Wall Street analysts are projecting S&P 500 earnings to decline 1.7% in the fourth quarter of 2022, with only a 1.7% rise in the first quarter of 2023. Our analysts put stock market performance trends, along with bonds and funds, into perspective—and look ahead with a fresh market outlook for 2024.
Forecasted U.S. Inflation Rate
Stocks may also be enjoying near-term tailwinds from the U.S. midterm elections. Since 1945, the S&P 500 has averaged a 6.1% gain in the fourth quarter of midterm election years and another 7.5% gain in the first quarter that followed. Technology started 2023 as the third-most undervalued sector as compared with our valuations. Technology rallied up to fair value, overshot to the upside, retreated back to fair value, and has bounced back well into overvalued territory.
Historical Comparison of Morningstar’s Valuations by Capitalization and Category
“While the strong growth to end 2023 was impressive on its own, it also helps explain the economic resilience that we’ve seen throughout the first quarter, as the positive momentum from the end of last year has carried over into 2024,” Millette says. The next couple of months will be crucial to the central bank’s effort to navigate a so-called soft landing for the U.S. economy without tipping it into a recession or allowing a potentially devastating rebound in inflation. The consumer price index bitbuy review gained 3.2% year-over-year in February, down from peak inflation levels of 9.1% in June 2022 but still well above the Federal Reserve’s 2% long-term target. Boeing (BA) shares also tumbled more than 25% in the first quarter as the company’s quality control problems continue to weigh on its stock price. AI server maker Super Micro Computer (SMCI) was the best-performing S&P 500 stock of the first quarter by a wide margin, gaining 255% year-to-date as investors continue to pile into AI stocks.
If inflation reaccelerates, the Fed would likely err on the side of caution and postpone its planned interest rate cuts. The probability of a Fed interest rate cut in June fell below 50% immediately following the ISM report, according to data from Bloomberg. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition.
It also launched a quantitative easing program, which basically meant it would launch a government bond-buying program to further stimulate the economy. Then, in October 2021, with the Canadian economy bouncing back and Covid-19 restrictions lifting, the BoC announced an end to its quantitative easing program. Prospects for a June interest rate cut were initially higher on Monday as investors reacted to Friday’s release of PCE inflation data, which was in line with expectations. If you believe the sales decline is temporary and that the structural case for EVs remains intact, the recent pullback could present a compelling entry point or second buying opportunity in the EV supply chain.