Global Equity Weekly

November 22, 2024 | 16:30

True North Strong

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Equity markets pushed higher again this week as the bull market runs ahead. The S&P 500 rose 1.7%, led by materials and energy, while banks and consumer discretionary lagged. Earnings results continued to roll out, and the reporting season is proving to be a solid one. Just over 76% of S&P 500 companies have now topped expectations in Q3, and growth is on track to push near 10% y/y—that's a very sturdy performance. While we’ve seen a mixed bag of individual results—a solid print from NVIDIA, a miss from Target and job cuts at Ford—one can’t argue with the underlying sturdiness of corporate profits.

Meantime, the TSX rose 2.2% on the week, and is quietly putting in an extremely strong performance as we near the end of 2024. Year-to-date, Canadian equities have rallied more than 21%, almost matching that seen in the S&P 500 (despite lack of exposure to big tech and communication services names). Indeed, all major sectors aside from the woeful telecoms are up on the year, and eight of ten have posted double-digit gains. Four of ten (materials, energy, financials and technology) have notched gains in excess of 20%.

A couple factors are driving this from a macro perspective. First, the Bank of Canada was quick off the mark in this easing cycle, and has also been moving fast. We see continued rate cuts through the spring taking policy rates back to a more neutral setting in short order. That has clearly helped banks, cyclicals and some rate-sensitive dividend payers.

Meantime, the easing cycle appears to be working and, after a wave of stimulus announced by the federal government this week, we expect Canadian growth to actually pick up through 2025. That flies against the conventional narrative that things like population caps and the U.S. Republican sweep will be unequivocally bad for Canada.

Finally, as we’ve noted in these pages many times, Canadian stocks are just cheap relative to their U.S. peers—they usually are, but the gap has been wider than normal. Suffice it to say that Canada might be getting some valuation adjustment too.

Source: Bloomberg

Major Index Performance

North American Sector Performances

(% change over period)

Table 1 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 2 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance