Despite sovereign debt issues in the Old World, 2011 should be another banner year for equities in North America.
A BMO Capital Markets report suggested the North American equity market should continue to post attractive gains in light of continued strength in the U.S. economy, an improving labour market in North America and strong corporate earnings.
Corporate earnings in the fourth quarter were solid with 76% of S&P500 companies beating profit expectations and 68% topping revenue expectations. While U.S. profit margin growth will likely level off by the second half of 2011 in line with the general growth levels expected in the U.S., Canadian profit growth will likely continue to outperform, especially those tied to strong commodity prices.
The report also suggested investors can look out for dividend increases, share buybacks and even merger and acquisition activity that will continue to support strong stock prices in 2011.
Generally, while stock valuations have recovered, the report suggested there is room for continued growth, although underlying earnings growth drive most returns.