As global investors look for signs of economic improvement, any sliver of good news is driving market gains, according to a report released by CIBC World Markets Inc.
“These are not normal times,” said Benjamin Tal, deputy chief economist at CIBC.
Tal said that in more “normal times” investors overreact to bad news and react less to good news – but not so right now.
“In today’s environment, good news has the upper hand,” he said. “Investors are highly responsive to positive data surprises, while negative news is often ignored or creatively interpreted as good news.”
Tal said that “Greece-fatigue” has led to investors becoming more indifferent to news from the European zone and a belief that any further downturn in the zone will be “dealt with effectively” by the European Central Bank.
He said that despite the grim economic news of the past three months, the Canadian market has grown by 9%. He said investors seemingly ignored Canadian data and paid more attention to positive factors in the U.S. and international economies.
Tal added that he expects Canadian investors to continue to focus on U.S. economic data and largely ignore further negative news from Canada’s manufacturing sector, where the drag of the strong dollar is still evident.
