Yep, we use cookies for security purposes and to improve your website experience. Who doesn’t right? By continuing to use the site, you agree to the use of cookies as described on our Privacy page. You can reject cookies by changing your browser settings.

Privacy policy

Monthly Market Insights

Earnings surprises power markets, inflation concerns remain

The mountain of worry and volatility that equity markets built up in September eased as October rolled in. October proved to have been the best month for U.S. equities since the start of the year, with the S&P 500 Index recording its largest monthly gain of 5.7%, helped by the release of strong corporate earnings. With 56% of S&P 500 Index companies reporting results as of October 29, 82% of those companies reported a positive earnings-per-share (EPS) surprise, which is above the five-year average of 76%. However, a few big technology names such as Amazon and Apple posted earnings which fell short of expectations. The S&P/TSX Composite Index also ended the month higher, with only 20% of companies having already reported earnings.

The NEI perspective

Reopening continues, but momentum is slowing. The global economy continues to recover from the coronavirus-induced shutdown, albeit at a deaccelerating rate.

Central banks weigh in on inflation. Inflation worries driven by recovering demand, supply chain disruptions, and now rising energy prices have many central bankers contemplating or starting to remove accommodative measures that have been in place since the start of the pandemic.

Equity market to get back to basics. The gradual removal of accommodative policy signals a move to a more fundamentally driven market in which earnings become a key driver of share-price movement. So far, Q3 earnings have been better than expected, lifting share prices higher.

From NEI’s Monthly Market Monitor for October

Equity

% return in C$

Canada: MSCI Canada; U.S.: MSCI USA; International markets: MSCI EAFE; Emerging markets: MSCI Emerging Markets. Source: Morningstar Direct

Fixed income and currency

% return in C$

Canada investment grade: Canada investment grade: Bloomberg Barclays Canada Aggregate; Global investment grade: Bloomberg Barclays Global Aggregate; U.S. high yield: Bloomberg Barclays U.S. High Yield. Source: Morningstar Direct.

Are buybacks back?

Lately there has been discussion about share buybacks, as companies have returned to the buyback market following strong cash flows and normalization of business activities. Share buybacks, or share repurchases, refer to a transaction in which companies buy back shares from shareholders. Repurchases can be prompted by factors such as transferring wealth back to shareholders in lieu of traditional cash distributions or if companies believe that their shares are being unfairly discounted. Buybacks can also simply be seen as companies deciding to reinvest in themselves.

After a hiatus in 2020, buybacks have resumed in full force with announced buybacks hitting record highs in 2021. Year-to-date buyback authorizations have totaled US$932B, the highest in dollar terms on record but modestly below the typical pace of authorizations as a share of market capitalization, according to Goldman Sachs. Authorizations have historically sent a strong signal for executions in subsequent quarters. This trend is positive for equities as it signals that companies are optimistic as we head into the second phase of the economic cycle. Companies are looking to return value to shareholders following a focus on preserving cash and resources during the heights of the pandemic. The share repurchase trend can also benefit stocks as reductions in shares outstanding create upward price pressures. Buybacks could help support total equity returns going forward, especially if we see moderation of broad equity gains in 2022.

Buybacks and dividends of S&P 500 Index companies

Source: S&P 500 Dow Jones Indices, as of September 2021. June 2021 data are preliminary only.

Aviso Wealth logo

Aviso Wealth Inc. (“Aviso Wealth”) is the parent company of Credential Qtrade Securities Inc(“CQSI”), Credential Asset Management (“CAM”), Qtrade Asset Management (“QAM”) and Northwest & Ethical Investments L.P. (“NEI”). NEI Investments is a registered trademark of NEI. Any use by CQSI, CAM, QAM or NEI of an Aviso Wealth trade name or trademark is made with the consent and/or license of Aviso Wealth. Aviso Wealth is a wholly-owned subsidiary of Aviso Wealth Limited Partnership, which in turn is owned 50% by Desjardins Financial Holdings Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and the CUMIS Group Limited.This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. This document is published by CQSI, CAM and QAM and unless indicated otherwise, all views expressed in this document are those of CQSI, CAM and QAM. The views expressed herein are subject to change without notice as markets change over time. Views expressed regarding a particular industry or market sector should not be considered an indication of trading intent of any funds managed by NEI Investments. Forward-looking statements are not guaranteed of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Do not place undue reliance on forward-looking information. 


The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. The MSSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to computing, computing or creating any MCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.