Stock Market Rallies to All-Time Highs!

Lower Inflation and Strong Earnings

Justin Lim
April 11, 2022
May 16, 2024
Market Review

The stock market has rallied to all-time highs in the Dow Jones, S&P 500, and NASDAQ. This was fueled by an inflation surprise lower, which broke the trend of continuous surprises higher over the past 2-3 months. But, also a better than anticipated earnings season which has shown the resilience of US companies in the face of higher rates, this rally has been led by Utilities and Financials which have outperformed the market this year. 


Stock Markets Hit All-Time Highs

US Inflation Surprised Lower

Canada Jobs Surprise!

Stock Markets Hit All-Time Highs

The Dow Jones, S&P 500, and NASDAQ all cruised to all-time highs with inflation surprising with a lower number than expected. This did put interest rate cuts back on the table for 2024 in the US. This was a bit of an eye-roll situation because the pace at which the market moves from lots of cuts to no cuts changes daily as soon as a new number comes out. The other catalyst has been many surprises in earnings forecasts from a diverse set of companies. One of the biggest surprises has been the Utilities sector, which many thought was dead in a higher-rate environment. To us, this was not too much of a surprise as their revenue has remained stable, and there was a bit of an overreaction in the selling out of this space. This “boring” sector has now outperformed the S&P 500 by about 3% in 2024.

Source: TD Directing Investing

The headline sector of Technology has also been rallying but not as strongly as one may think. Technology is slightly above the highs that it made in March of 2024 and underperforming the S&P 500 this year.

Source: TD Direct Investing

Valuations are still a concern and while the Technology companies are hitting new all-time highs, this might be due to dividends and share buybacks. Meta and Alphabet did announce new dividend payments, while Apple announced the largest share buyback in history of $110 billion dollars. These are great announcements, but this does signal there are not many accretive options out there for them. It is also important to note that they are all spending a lot of money on AI (and other projects) which is lowering their earnings growth. This is a concern because it is yet to be determined how these companies will monetize AI. Meta for example is spending $35-40 billion this year and it is not known how they make money off this. 

Inflation, earnings strength, and dividends/buybacks is all very positive news for the market and the reason why we are sitting at all-time highs. The market is broadening and there are many places to invest. While all-time highs are generally the worst time to buy, the earnings reports in general have been very strong and it appears higher rates have had less of an affect on companies than thought. This justifies the current rally and creates a more supportive downside on pullbacks. 

US Inflation Surprised Lower

Surprisingly, US Core Inflation came in lower at 3.6% vs. 3.8% expected. This was surprising because there were a few numbers that came out earlier in the week as well as the week before that suggested it would be hotter. Because of this reason the market has put interest rate cuts back on the table for 2024. The other reason they could cut would be weakening employment (which has been strong) but could weaken as we suggested in our last update. Even though inflation has slowed to a snail’s pace, it still is moving downward and has not spiked.


Food inflation remains very low around 1% and energy has been negative for about a year, the two sections holding this up are shelter and services which sit at around 5% annual growth. Shelter is the largest contributor to the core inflation metric with a weighting of about 33%, and there is potential that an interest rate cut will reduce shelter costs given that mortgage costs are a large portion of that. A small decrease would likely not affect housing prices but would lower the operating costs (aka mortgage). 

Another reason the US may gut is global interest rates. While the US is the biggest influencer out there, if every other country is cutting the US will be pushed to cut. The US has the largest amount of multinational companies that export products and services to other countries. If they keep their interest rates high while everyone else cuts this will hurt their companies' ability to generate revenue and profit. Which could hurt their stock market, the US does not like this.

Canada Jobs Surprise!

The Canadian economy added 90,000 jobs last month, which was a complete surprise. When looking into it about half were part-time but the jobs report was pretty good. The job additions were in good private sectors and were not led by normal government spending. The negative of the report was wage inflation is very weak. This does signal that incomes are not growing to keep up with inflation and Canadians are getting slightly poorer. To all of us Canadians, this is not a surprise. 

Source: tradingeconomics

If we take the negative jobs last month and spread this surprise across the two months, we are still right on the pace we have seen throughout the year. This is about 30,000-50,000 jobs per month, but this unfortunately is not enough. With population increases and regular job turnover, this is creating an upward trajectory in the unemployment rate.

Source: tradingeconomics

This still projects a decrease in interest rates for Canadians this year. If they wait until employment is higher, they will have waited too long and will only increase the recovery time. Next week we will have the Canadian Inflation and GDP reports which will be the other half of the puzzle and should signal when the Bank of Canada may cut rates.


The indexes are reaching all-time highs, and this is being spread across all sectors. This is great because investors do not need to take valuation risks in the Technology sector and can receive the same returns in more conservative spaces. Earnings have been strong, and companies are showing their resilience vs. higher rates. With rates expected to be reduced, this is making the future all the brighter. Canada did have a good jobs month but is far from growing, even with this big month we are just hanging on. We expect rate cuts in Canada and Europe sooner and US cuts to happen later. With the current investment options, there is not much reason to jump into high-valuation growth stocks when you can receive similar returns in lower-risk investments. 

Justin, Konrad, and Merriel

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Content Sources: Bloomberg, Trading Economics, Yahoo Finance, BCA Research

Disclaimer: This newsletter is solely the work of Konrad Kopacz and Justin Lim for the private information of their clients. Although the author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and the author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, Echelon.

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