There’s been a lot of media fanfare about the possibility the S&P/TSX Composite Index might break the 15,000 barrier. It’s a nice round number, acknowledges Kurt Reiman, chief investment strategist at BlackRock Canada, but he says unless that number coincides with some strong corporate earnings, it’s not much of a milestone.

The S&P/TSX Composite has been there before. It first crested 15,000 on the strength of soaring energy stocks in May 2008, on the brink of the Great Recession. It topped 15,000 again in June 2014, goosed once more by the energy sector. After several corrections and rebounds, the market finally said goodbye to 15,000 in June 2015.

“The TSX has continued to challenge the 15,000 level and each time it has, it comes unglued,” says Reiman. “There’s some worry that these periods over 15,000 have been short-lived episodes and not sustainable. A lot of investors are probably looking at the marker with some skepticism because they’ve been skittish of a rally that looks like climbing a wall of worry. They wonder if hitting 15,000 is a signal for the market to come crashing down again.”

Reiman notes that in one respect the S&P/TSX composite is not much different from the S&P 500, where a mid-2014 rally saw the market cracking 2,000 — and bouncing back and forth in a narrow band ever since.

“The U.S. Federal Reserve was ending its bond buying program at that time and valuations were looking pretty stretched. This was also when the oil price began its prolonged slump and the U.S. dollar was strengthening,” says Reiman. “But if they had hit 2,000 while markets were cheap, earnings were growing and the Fed was easing its stance on monetary policy, they would have blown past 2,000 and may never have looked back.”

Reiman says he doesn’t buy theories that higher market troughs are creating a new foundation for a sustainable 15,000-plus future.

“Investors buy earnings,” he says. “To the extent that there’s any sustainable rally in the market it’s got to be underpinned by earnings growth.”

Part of the current uneasy rally in Canadian stocks has been fuelled by multiple expansion — the willingness of investors to pay more for every expected dollar of earnings. That’s not surprising, considering the sorry state of available returns on traditional fixed-income investment vehicles.

Even robust economic growth isn’t a prerequisite to a stock market rally, provided earnings reports are strong.

“The worry I’ve had with this rally so far is that earnings expectations have fallen,” he says. “We don’t yet know what the third quarter is going to look like, but I’m pretty encouraged about the outlook for earnings. The good news for the second half of this year and into 2017 is that earnings expectations have been revised up.”

Reiman says he doesn’t want to throw cold water on any enthusiasm about the S&P/TSX composite’s push to 15,000, but cautions investors to look carefully at what the number signifies.

“Oil prices got us past the 15,000 mark before, but as oil prices cratered, the market couldn’t sustain those levels,” he says. “As an investor, I would be more interested in following the performance of earnings coming from the energy and materials sector and looking at oil as an indicator of economic sustainability.

Reiman says he would like to see oil moving back to the high $50-a-barrel range, a decent (even if sluggish) growth rate, adequate monetary stimulus from central bankers and some pro-growth fiscal policy to anchor TSX numbers.

“If that was topped by a generous layer of earnings, investors would have a reason to celebrate about cracking 15,000,” he says.

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