Q2 earnings have generally been better than expected as roughly 5% of the S&P 500 companies that have reported so far (as at the time of writing) have delivered upside surprises. However, there has only been a few stock price surges in response to positive earnings surprises if you consider Facebook and Apple in the US and Air Canada here in Canada. Excluding these companies, we’ve seen muted price appreciation for positive earnings surprises. On the other hand, we have seen severe stock price declines for earnings misses (recall steady-eddy Cineplex). Bottom line, ex‑energy, S&P 500 EPS growth is running at +9.3% year-over-year. This is a good number, especially given Citigroup’s US economic surprise index which, while improving, remains deep in negative territory. Reasons for the continuing negative economic index include weaker than expected ISM numbers, auto sales staying below the 17 million SAAR for the fifth straight month, and June construction spending unexpectedly contracting...

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During the first half of 2017, a divergence between growth and stock market performance has developed in Canada. Canadian economic growth is leading G7 countries while the TSX is one of the worst performing indices YTD. The latest Bank of Canada business outlook survey (summer 2017) points to increased confidence among CEOs and shows that positive business prospects are increasingly widespread across regions and sectors. The upbeat report provided the evidence Mr. Poloz required to conclude that the stimulus provided via two rate cuts during the energy downturn have “done their job” and should be taken away...

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Inside this month’s commentary:

1.      Is 2017 shaping up to be a repeat of 2015 for Canadian equities (recall the TSX delivered negative returns in 2015)? See inside for our view.

2.     Interest rates and inflation: BNN Weekly interview with Robert Kaplan, President of the Dallas Federal Reserve

3.     Canadian bank stocks – the bedrock of retail investor portfolios: Who is left to buy?

4.     Annualized returns when investors buy the index at peaks vs troughs

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Are you confused yet? Lots of investors are. After 100 days in office Trump is certainly more confusing than ever before. Reflation or no reflation? Policy change or no policy change? Markets certainly assume and hope something will get done on healthcare and, more importantly, taxes, but that’s a roll of the dice. Nevertheless, animal spirits rule as record amounts of money flows into passive index ETFs.

The Forge First portfolios are not positioned to “bet” one way or another on Trump getting something done or not. For us, “Trump” is another unknown in a roster of global uncertainties which could roil already highly valued equity markets.

During the month of April, the Forge First funds experienced only minor losses. Please continue reading for a macro overview and discussion of the funds’ current positioning and performance.

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