Russell 2000 Index (RLS.I) & S&P/TSX Composite Index (TSX.I)

Stock market action has settled down a bit over the last week. The recent shocks of the Ukraine war starting, commodity prices soaring and both North American central banks starting to raise this month have passed and new expectations appear to have been priced in by investors. Interestingly, Fed Chair Powell’s comments earlier this week about the Fed potentially accelerating rate hikes to combat inflation were taken in stride by equity investors even as they pushed the US 10-year treasury note yield up above 2.30% for the first time since 2018.

Some of the areas of the equity market which had become most depressed lately have started to show signs of life, including emerging markets, Chinese markets which were slammed on new lockdowns but quickly bounced back, continental European indices, small cap stocks, and North American technology sectors such as semiconductors and internet. Although this action looks encouraging, it is too soon to tell whether these were quick relief rallies easing deeply oversold conditions, or the start of more lasting recovery trends.

In commodity trading, recent corrections appear to have run their courses and broader upward trends appear to be resuming. This has been most apparent in WTI crude oil, where having corrected back toward $95.00/bbl recently from a peak near $130.00/bbl, the price has bounced back up above $115.00/bbl lately. Metals such as copper and grains like corn and rice, have also been on the rebound.

The coming week is relatively light for economic and corporate news scheduled with today’s flash PMI reports being the main event until ADP payrolls next Wednesday. It also is the last week of the month, the quarter and the fiscal year for many companies in the investment industry, so we could see some portfolio adjustments over the next few days as investors get ready for spring and the next earnings season.

In this issue of Equity Leaders Weekly, we look at what recent strength in Canadian stocks and a rebound in US small caps are telling us about investor sentiment.

Russell 2000 Index (RLS.I)

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