After two weeks of extremely strong returns for stocks, last week felt disappointing. But it can’t go up forever, and the market didn’t really slide back much. It was more like taking a breather. The result is very little change to the outlook. Stocks continue to outpace bonds, and US large-cap stocks (SPY) and Canadian large-cap stocks (XIU) appear to be the best positioned for growth in the near future.
Interest rates have fallen slightly. They really don’t look like they could go lower, but I’ve learned by now to “never say never.” Interest rates and inflation rates don’t reflect great strength in the economy, but the stock market is actually a better advance indicator of the economic cycle. Having said that, earning reports are starting to come in, and for the next couple weeks, past results will probably have the greatest effect on the outlook for corporate profits.