Markets responded positively this week to generally better overall economic news. With the exception of the Canadian which saw its unemployment rate inch up to 7.3%, global economic data was modestly improved from last month. This sent markets climbing with gains in most stock markets in the 1-2% range for the week. Canada's TSX was the best performer, with rising oil prices contributing to a rally in the commodities sector (up 6% in the past 5 days).
The US Federal Reserve reiterated their commitment to a normalization of interest rates, meaning a rate hike later in the year is more likely than not. This improving outlook by the world’s most important Central Bank has to be seen as the 'eagle' in the coal mine -a bellwether indicator.
Whether this translates into further stock market gains remains to be seen. Our view remains cautious, based on the belief that much of the good news has been priced into stocks, and equity fund investors need to be modest in their return expectations going forward.
Hope for the best, but plan for the worst is good advice. And so we have, with our client portfolios remaining defensively positioned with an overweight in fixed income (bond) funds as a hedge against market volatility and downside. The rest of the quarter is unlikely to show the hand of what the rest of the year has in store for investors. Even so, a few more weeks like the last one are always welcome.