Month in Review - June 2021
Stock markets continued to move higher in June with the S&P 500 (CAD) rising 5.06% bringing the index up 6.42% for the second quarter. The TSX Composite, rose 1.84% in June closing out a strong quarter up 7.91%, primarily off big gains in energy companies. There was not much news for the markets to digest this in June except for the regular 6-week meeting of the US Central Bank (The FED). These meetings are for the discussion of economic policy and how the FED will act with respect to interest rates and the buying of US Government Bonds. The market was awaiting word on both of these items. While there was no clear consensus, it appears that Jay Powell the head of the FED will continue on the current path of lower rates for longer and continued bond buying at the current pace. They cited the still high unemployment numbers as key reason for holding the course. The equity markets reacted favourably to this news. While this news gives investors confidence, the result is that stock valuations as measured by the Forward Price/Earnings ratio (the price we pay to buy $1 of future S&P 500 earnings) are rising again. As this chart below from Refinitiv shows us the median P/E ratio for US stocks is approaching levels not seen since the technology bubble in 2000.