Equity markets have staged a strong rebound following the peak negativity seen in April, with prices forming a notable V-shaped recovery. This resurgence has been driven by encouraging developments in both corporate earnings and global trade. Although forward estimates have been revised modestly downward, they remain broadly in-line, helping ease concerns around a potential growth slowdown.
RBC Capital Markets recently highlighted that the percentage of earnings growth declined in late April to a level often associated with periods of an earnings growth scare. Nevertheless, first quarter earnings have significantly outperformed expectations. The blended growth rate has surged to over 13%, up from roughly 7% at the start of the quarter. Given that corporate earnings are a key driver of equity prices, this strong performance has been instrumental in lifting markets.
Adding to the positive momentum, The Federal Reserve has taken a largely passive stance during this rebound, adopting a ‘wait and see’ approach. However, policymakers have reinforced their willingness to cut interest rates if conditions warrant, providing another potential catalyst for equity markets going forward.
The S+P 500, which began the year near 5,881, fell nearly 18% earlier in the year, but has recovered all of the decline over the past six weeks. This resilience highlights that despite prevailing negative headlines and sentiment, there are still multiple supportive factors for equity markets-particularly for diversified strategies like in our advisory core –satellite portfolio.