Although the market has already forgotten its earlier drama, our customary pessimistic optimism remains.

After all, it was just four weeks ago that the Canadian market was poised to re-test its January low, while the U.S. market was hitting a new year-to-date low.

Since then, somewhat rosier economic data, the promise of fiscal stimulus, a jump in oil prices, and a monetary booster shot from the European Central Bank have helped Canada’s benchmark S&P/TSX Composite Index stage an impressive relief rally, with the index up nearly 14% from its late-January low.

Meanwhile, the S&P 500 is up more than 10% from its low of just a month ago.

While it was apparent that things weren’t nearly as bad as the market seemed to think they were, we would expect more volatility ahead.

For one, even if some developed-world economies are chugging along at a better-than-expected pace, there are still worrisome economic data emanating from China, particularly the 25.4% year-over-year drop in February exports the country’s customs administration reported earlier this week.

And the rise in oil prices could be subject to a brutal snapback, even if we’ve already witnessed the cycle’s ultimate bottom. Crude’s rally has been underpinned by hopes of a production freeze among OPEC producers, along with significant supply disruptions in Iraq and Nigeria.

The former isn’t all that reassuring since, at best, it would freeze production at already-high levels, while the latter will likely be resolved in the coming weeks.

At the same time, higher prices could allow beleaguered producers to continue pumping with the hopes of generating sufficient cash flows to stave off their eventual debt reckoning. That would undo progress in narrowing the supply-driven glut.

Lastly, economists don’t see Canada’s gross domestic product growing at full capacity at any point through 2018. The consensus does show a moderate economic expansion, peaking at 2.1% for full-year 2018, but still substantially below the 2.5% threshold that the Bank of Canada has previously identified as necessary to remove the economy’s slack. In other words: Goodbye, New Normal; hello, New Mediocre.

Those factors aside, it’s hard not to smile when the gloom temporarily subsides. And, of course, this welcome reprieve creates new dilemmas, even as it pushes the old ones aside.

For the Bank of Canada (BoC), there’s reason to be optimistic, but there are still challenges in this ever-shifting environment.

On the positive side, the central bank had been widely expected to cut rates by another quarter-point, which would have signaled the country’s economy remains deeply troubled. But a majority of traders now expect the BoC’s benchmark overnight rate to stay at 0.5% through the end of the year.

A big factor in that change is the expected fiscal stimulus from Canada’s newly elected Liberal government. BoC Governor Stephen Poloz has long lamented that the central bank’s efforts to stimulate the country’s economy were not being met with similar efforts by the federal government.

As we’ve seen since the downturn, there are limits to what even extraordinarily accommodative monetary policy can achieve.

Of course, in the U.S., we’ve also witnessed how fiscal stimulus can turn into a giant boondoggle. Perhaps Canadian politicians will be shrewder allocators of capital than their profligate U.S. peers (quiet, cynics).

Another consequence of the rebound in energy prices is that it’s also helped lift the Canadian dollar, which currently trades near US$0.76, up from a 12-year low just under US$0.69 in late January.

The loonie’s rise could pinch exports, which recently hit a new all-time high largely due to the lower exchange rate. And therein lies the BoC’s dilemma. But for now the central bank seems unconcerned about the currency’s sudden appreciation.

Let’s hope this happy confluence of events persists for a while longer.

Our Super-Secret Stock Pick

In May, we’re holding our annual Wealth Summit–this year in Las Vegas. It’s a great way for us to meet you, our subscribers, one-on-one, and there are still spaces open if you’re interested.

Also this year, we’ll be making a special recommendation to those who attend the Summit, and to those who are part of our Wealth Society, whose members receive all the Investing Daily newsletters and other premium services.

It’s a fun exercise for us because there are no rules. We don’t have to pick a Canadian stock. In fact, our pick doesn’t even need to be a stock: It could be an alternative investment that isn’t traded on a public market.

Our publisher says we can’t reveal the pick in Canadian Edge, or even to him before the Summit. But in the weeks ahead, we’ll let you in on some of the research we’re doing to identify this exclusive pick.