Market week: S&P 500 posts best quarter in 10 years

Optimism for U.S.-China trade talks

Despite a recent inversion of the U.S. government bond yield curve and yet another rejection of a Brexit proposal by the British Parliament, the major stock market indices posted solid gains on the week, as investor sentiment was buoyed by a Tweet from U.S. Treasury Secretary Steven Mnuchin following the conclusion of this round of U.S.-China trade and tariff talks in Beijing. Mnuchin indicated further talks will take place in Washington next week. The S&P 500 Composite Index posted its best quarterly gain since 2009.

U.S. Treasury bonds gained ground on Friday, and the yield reverted to its normal structure with longer-term maturities trading with a higher yield than shorter maturities. Even though the difference was minimal, it was enough to encourage investors to boost equities. The yield curve had inverted the previous week, as short-term U.S. Treasury issues carried a higher yield than long-term issues, an indication that investors believe the pace of economic growth will slow and that stock markets are likely to reach a peak before sinking into bearish territory.

The S&P 500 Composite Index climbed 1.2% on the week, posting a 1.8% gain for March, and advancing 13.1% in the first quarter, its best quarterly gain since the third quarter of 2009. The Nasdaq Composite Index likewise rose 1.1% on the week for a 2.16% monthly gain and a 16.5% quarterly surge. Toronto’s S&P/TSX Composite Index gained less than 1% on the week, rising 0.6% in March, while still posting a very respectable 12.4% gain for the first quarter. Much of that can be attributed to the strong gains in the energy sector, underpinned by a 32.6% increase in the price of crude oil through the first quarter.

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