Stock markets could be in for more gains as the rally that started a month ago on North American markets shows no signs of abating, despite last week’s news of huge job losses in the United States.
Indexes were weak on Friday after the U.S. Labour Department reported the economy shed 663,000 jobs last month while the unemployment rate ran up to 8.5 from 8.1 per cent, the highest since late 1983.
But markets held onto substantial gains as other economic reports persuaded some that a bottom could be in place.
Impressive as those gains are, it’s important to “benchmark it to where we were,” said Avery Shenfeld, chief economist at CIBC World Markets. Before the rally started, the TSX was at fall 2004 levels and the Dow at 1997 lows and indexes are now resting at where they were in February.
“A lot of this could be racked up to investors deciding this is 1981 rather than 1929,” Shenfeld said.
“So if it’s not a depression, then certainly some sectors of the equity market were overshooting to the downside.”