So much for that April market correction.
According to the naysayers, April was supposed to be the start of doom and gloom for equity markets. Just look at how much the S&P 500 had run up, they said. There was no way it could stay this strong.
And look at the past few years, they added. Markets always got soft in April, only to slide in May on the heels of European sovereign debt fears. In 2011, the S&P/TSX Composite Index peaked near 14,200 in April, and then tumbled after the commodity super-cycle crashed.
Here’s the month-end verdict: equity markets on both sides of the border were basically flat. Though April isn’t officially over until markets close today, the TSX is down only 1.3 per cent for the month, the S&P 500 is off 0.8 per cent and the Nasdaq lost only 1.3 per cent. It turns out better-than-expected first quarter earnings kept markets afloat.
Does this mean markets absolutely, positively, won’t get rocked? Of course not. Spain just went back into recession, as did the U.K. last week. But maybe investors have priced these things in. Just look at the TSX. It’s traded in a relatively tight range since January as investors wait out the storm, never over-reacting to bad news, but also never over-jumping at positive earnings.
And maybe, just maybe, investors have realized that throughout the European crisis and the early warnings of China’s economic slowdown, corporate earnings haven’t been so bad. Strip out all the fear, and the fundamentals have been encouraging.