Market Outlook, May 24, 2016

The US Fed(eral Reserve Bank) is talking about raising interest rates. Normally, that would cause bond yields to rise and bond values to fall. But bonds continue to perform reasonably, and with stocks taking a breather, bonds appear to be keeping up. In the past, I’ve never had a chance to see a graphical representation of a yield curve, so I didn’t have a concept of what a “normal” yield curve looked like. It’s usually expected to be convex, where T-bills have low yields, short bonds are quite a bit higher, medium bonds are a little higher yet, and long bonds are slightly higher than that. Ever since I’ve been creating a graphical representation of the yield curve (see below), it’s been concave. Last week, I rewrote the algorithm that produces it, in order to increase the number of data points, with the expectation that it would change the shape. The good news is that what I created previously was not misleading. The bad news is that I don’t know yet what a concave yield curve means, other than the fact that rates are really low.

I will also point out that I added a calculation for the current risk premium of equities, both large cap and small cap Canadian stocks. I did this by finding the earning yield (inverse P/E) and subtracting the long bond yield. What is surprising, currently, is that the risk premium for small caps, which should be larger, is actually quite a bit smaller. Therefore, small caps appear overpriced and unlikely to provide enough (excess) return to compensate for the risk.

Interest Rates

yieldcurve

The 3 month T-bill rate is 0.46%, the 1 year T-bill rate is 0.55%, the 3 year government bond yield is 0.65%, the 10 year government bond yield is 1.35% and the long government bond yield is 1.99%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.The equity risk premium for large caps, in Canada, currently appears to be 3.02%. For small caps, it currently appears to be 1.41%.

Credit Environment

Corporate bonds are performing better than government bonds, long bonds are doing better than short bonds and, in the third dial, high quality is doing slightly better than high yield.
guage1guage2guage3

Currency

The Brazilian Real (BZF), and Japanese Yen (FXY) are the only currencies outperforming the US dollar, which has been rising for the past couple weeks.
The Canadian dollar has been losing value compared to the US dollar.

Equities

Where does there appear to be more opportunity right now? Stocks are taking a break and doing barely better than bonds.
US bonds vs. US stocks:
guage4
Canadian bonds vs. Canadian stocks:
guage5

Global Markets

Comparing national stock markets, Peru (EPU), Philippines (EPHE), New Zealand (ENZL), Denmark (EDEN), and Belgium (EWK) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,048.04. This is 0.04% higher than last week’s price (2,047.21), and -1.90% lower than last month’s price (2,087.79), and 6.13% higher than the price three months ago (1,929.80), and -1.60% lower than the price six months ago (2,081.24), and -2.54% lower than the price one year ago (2,101.49).The average P/E ratio of the S&P 100 (equal weighted) is 22.00. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.54% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • California Resources Corporation (CRC)
  • Monsanto Company (MON)
  • Amazon.com, Inc. (AMZN)
  • Devon Energy Corporation (DVN)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company (GM)
  • Ford Motor Company (F)
  • Metlife, Inc. (MET)
  • Conocophillips (COP)

Canadian Stocks

Yesterday’s closing price was 13,919.60. This is 0.19% higher than last week’s price (13,893.50), and 0.33% higher than last month’s price (13,874.00), and 9.06% higher than the price three months ago (12,763.40), and 3.31% higher than the price six months ago (13,473.80), and -6.88% lower than the price one year ago (14,947.50).The average P/E ratio of the TSX60 (equal weighted) is 22.88. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.37% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada (POW.to)
  • National Bank Of Canada (NA.to)
  • Bank Of Nova Scotia (BNS.to)

Other Assets

Crude Oil (HUC.to),TSX REIT (XRE.to), Global Infrastructure (ZGI.to), Gold (IGT.to), Canadian TSX (ZCN.to), Canadian Universe Bond (XBB.to), US S&P 500 (SPY), Silver (HUZ.to), World stocks (VDU.to) are performing better than cash.
The gold price is rising, which often indicates nervousness in equity markets.
The oil price is rising, which increases manufacturing input costs and energy costs and may slow economic expansion.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XSP hedged to Cdn$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) of gold
  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • 2 units (40%) bonds

Market Outlook, May 16, 2016

The American dollar is strengthening, compared to most other currencies. Although the Canadian dollar continues to trade favourably compared to the American dollar, this is likely related mainly to the rising oil price. Bonds and stocks are both performing well, because interest rates are low and the economy is expected to begin its recovery.

There was some volatility over the past week, with certain markets (I forget which) dropping by over 5% and recovering within a couple days. Many national markets are rising, but not nearly as many as a week or two ago. There are far fewer large-cap stocks in the US market that have strong price momentum. In Canada, a number of large-caps still have positive momentum, but they are mainly oil & gas producers and miners. The TSX has risen 11% over the last three months, but the past month has been essentially flat; it seems like investors are watching and waiting.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.47%, the short government bond yield is 0.60% and the long government bond yield is 1.83%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

Corporate bonds are performing better than government bonds. I’m not clear whether this is a normal situation of the higher risk investment paying a higher interest rate, or whether the rates on riskier bonds are falling, causing capital values to rise.
guageLong bonds are in favour compared to short bonds:

guage-1

High quality bonds are favoured over high yield bonds:

guage-2

Currency

The Brazilian Real  (BZF), Japanese Yen (FXY), Canadian Dollar (FXC), and Euro (FXE) are looking strong relative to the US dollar.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

Where does there appear to be more opportunity right now?
US bonds and US stocks are both providing positive returns.
guage-3
Canadian bonds are profitable, but less than Canadian stocks:
guage-4

Global Markets

  • Philippines has changed 7.73% in price since last week’s close.

Comparing national stock markets, Peru (EPU), Brazil (EWZ), Russia (ERUS), New Zealand (ENZL), Norway (ENOR), Philippines (EPHE), Denmark (EDEN), Canada (EWC), Belgium (EWK), Australia (EWA), USA S&P 500 (IVV), Thailand (THD), and Saudi Arabia (KSA) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,046.61. This is -0.59% lower than last week’s price (2,058.69), and -1.64% lower than last month’s price (2,080.73), and 7.97% higher than the price three months ago (1,895.58), and -1.37% lower than the price six months ago (2,075.00), and -3.52% lower than the price one year ago (2,121.24).The average P/E ratio of the S&P 100 (equal weighted) is 22.10. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.53% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • California Resources Corporation (CRC)
  • Amazon.com, Inc. (AMZN)
  • Facebook, Inc. (FB)
  • Monsanto Company (MON)
  • Lockheed Martin Corporation (LMT)
  • Emc Corporation (EMC)
  • Halliburton Company (HAL)
  • Bristol-myers Squibb Company (BMY)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company (GM)
  • Ford Motor Company (F)
  • Metlife, Inc. (MET)
  • Conocophillips (COP)

Canadian Stocks

Yesterday’s closing price was 13,748.60. This is 1.36% higher than last week’s price (13,563.80), and 0.82% higher than last month’s price (13,637.20), and 9.51% higher than the price three months ago (12,555.00), and 4.73% higher than the price six months ago (13,127.20), and -6.68% lower than the price one year ago (14,733.00).The average P/E ratio of the TSX60 (equal weighted) is 22.03. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.54% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada, Sv (POW.to)
  • National Bank Of Canada (NA.to)
  • Bank Of Nova Scotia (BNS.to)

Other Assets

Oil (HUC.to), Base Metals (ZMT.to), REITs (XRE.to), Silver (HUZ.to), Gold (IGT.to), Global Infrastructure (ZGI.to), Natural Gas (HUN.to), TSX Canadian stocks (ZCN.to), US S&P 500 (SPY), and Canadian Universe Bond (XBB.to) are performing better than cash.
The gold price is rising, which often indicates nervousness in equity markets.
The oil price is rising, which increases manufacturing input costs and energy costs and may slow economic expansion.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XSP hedged to Cdn$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) of gold
  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • One unit (20%) US stocks
  • 1 unit (20%) bonds

On Sale!

There hasn’t been a recent market crash, but some stocks appear to be cheap compared to their long-term valuations. Their P/E ratios are a little lower than usual, their P/B also, and dividend yields are a little higher than usual. This isn’t a huge clearance, “everything must go” type sale. This is a nice-to-find, “10% off” type of sale.

If a long-term, income-oriented investor were to have cash available, or looking to rebalance from bonds to stocks, here are 19 companies that would make a nice portfolio. They all come from the TSX60, so these are large cap, well known stocks. There is almost enough diversification for a reasonable portfolio, perhaps the RRSP portion of a larger portfolio, or the Canadian portion of a portfolio that is augmented by an ETF for another stock market, eg. XSP.

Power Corporation Of Canada (POW.to) 4.33%
National Bank Of Canada (NA.to) 5.18%
Potash Corp Of Sask Inc (POT.to) 6.1%
Bank Of Nova Scotia (BNS.to) 4.64%
Canadian Imperial Bank Of Comme (CM.to) 4.8%
Bank Of Montreal (BMO.to) 4.17%
Royal Bank Of Canada (RY.to) 4.26%
Shaw Communications Inc. (SJR-B.to) 5.01%
Sun Life Financial Inc. (SLF.to) 3.69%
Toronto-dominion Bank (TD.to) 3.96%
Suncor Energy Inc. (SU.to) 3.43%
Snc-lavalin Sv (SNC.to) 2.12%
Manulife Fin (MFC.to) 4.03%
Transcanada Corp. (TRP.to) 4.39%
Fortis Inc (FTS.to) 3.7%
Inter Pipeline Ltd (IPL.to) 6.1%
Emera Incorporated (EMA.to) 4.11%
Agrium Inc (AGU.to) 4.03%
Telus Corporation (T.to) 4.61%

Average yield: 4.35%

This group of stocks is overweight financials and underweight other market sectors, but that’s the nature of this particular sale.

Market Outlook, May 9, 2016

Bonds and gold continue to hold up. Normally, they move opposite to the direction of stock prices, so this calls into question the recent gains by stocks. Perhaps that was a temporary movement and cannot be relied on to continue. Having said that, the outlooks for stocks is still positive for the moment, especially small cap stocks in Canada.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.46%, the short government bond yield is 0.59% and the long government bond yield is 1.84%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

When the dials point left, the credit environment is cautious and risks are priced higher.
guage1guage2guage3

Currency

The Brazilian Real (BZF), Japanese Yen (FXY), Canadian Dollar (FXC), Swedish Krona (FXS), Singapore Dollar (FXSG), and Euro (FXE) are looking strong relative to the US dollar.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

It’s surprising to see both stocks and bonds with a positive outlook at the same time, but stocks have a little more momentum than bonds, both in the US and in Canada.
US bonds vs. US stocks:
guage4
Canadian bonds vs. Canadian stocks:
guage5

Global Markets

  • Brazil has changed -7.42% in price since last week’s close.
  • Canada has changed -6.34% in price since last week’s close.
  • China has changed -5.04% in price since last week’s close.
  • Italy has changed -5.66% in price since last week’s close.
  • Malaysia has changed -5.91% in price since last week’s close.
  • Mexico has changed -6.46% in price since last week’s close.
  • Peru has changed -8.05% in price since last week’s close.
  • Qatar has changed -5.29% in price since last week’s close.
  • Russia has changed -6.40% in price since last week’s close.
  • South Africa has changed -10.88% in price since last week’s close.
  • Turkey has changed -12.27% in price since last week’s close.

Comparing national stock markets, Peru (EPU), Brazil (EWZ), New Zealand (ENZL), Chile (ECH), Russia (ERUS), Norway (ENOR), Australia (EWA), Canada (EWC), Germany (EWG), Saudi Arabia (KSA), USA S&P 500 (IVV), Spain (EWP), Belgium (EWK), Denmark (EDEN), Thailand (THD), India (INDA), France (EWQ), Austria (EWO), Japan (EWJ), Netherlands (EWN), Mexico Inve (EWW), and United Kingdom (EWU) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,057.14. This is -1.17% lower than last week’s price (2,081.43), and 0.47% higher than last month’s price (2,047.60), and 10.99% higher than the price three months ago (1,853.44), and -2.15% lower than the price six months ago (2,102.31), and -2.45% lower than the price one year ago (2,108.86).The average P/E ratio of the S&P 100 (equal weighted) is 21.39. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.67% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • California Resources Corporatio (CRC)
  • Amazon.com, Inc. (AMZN)
  • Norfolk Southern Corporation (NSC)
  • Facebook, Inc. (FB)
  • Bristol-myers Squibb Company (BMY)
  • Lockheed Martin Corporation (LMT)
  • Unitedhealth Group Incorporated (UNH)
  • Chevron Corporation (CVX)
  • Bank Of New York Mellon Corpora (BK)
  • Occidental Petroleum Corporatio (OXY)
  • Halliburton Company (HAL)
  • Blackrock, Inc. (BLK)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company (GM)
  • Ford Motor Company (F)
  • Metlife, Inc. (MET)

Canadian Stocks

Yesterday’s closing price was 13,701.50. This is -1.18% lower than last week’s price (13,865.60), and 2.28% higher than last month’s price (13,396.70), and 9.30% higher than the price three months ago (12,535.40), and 1.05% higher than the price six months ago (13,558.80), and -7.98% lower than the price one year ago (14,889.00).The average P/E ratio of the TSX60 (equal weighted) is 24.46. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.09% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • Kinross Gold Corp. (K.to)
  • Bombardier Inc., Cl. B, Sv (BBD-B.to)
  • Teck Resources Limited (TCK-B.to)
  • First Quantum Minerals Ltd (FM.to)
  • Yamana Gold Inc (YRI.to)
  • Barrick Gold Corporation (ABX.to)
  • Agnico Eagle Mines Limited (AEM.to)
  • Silver Wheaton Corp. (SLW.to)
  • Eldorado Gold (ELD.to)
  • Goldcorp Inc (G.to)
  • Franco-nevada Corporation (FNV.to)
  • Restaurant Brands International (QSR.to)
  • Arc Resources Ltd. (ARX.to)
  • Crescent Point Energy Corp. (CPG.to)
  • Snc-lavalin Sv (SNC.to)
  • Cenovus Energy Inc. (CVE.to)
  • Canadian Tire Corporation, Cl. (CTC-A.to)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada, Sv (POW.to)
  • National Bank Of Canada (NA.to)
  • Potash Corp Of Sask Inc (POT.to)
  • Bank Of Nova Scotia (BNS.to)

Other Assets

Silver (HUZ.to), Base Metals (ZMT.to), Natural Gas (HUN.to), Crude Oil (HUC.to), Gold (IGT.to), REITs (XRE.to), TSX Capped Composite (ZCN.to), USA S&P 500 (SPY), Global Infrastructure (ZGI.to), Canadian Universe Bond (XBB.to) are performing better than cash.
The gold price is rising, which often indicates nervousness in equity markets.
The oil price is rising, which increases manufacturing input costs and energy costs and may slow economic expansion.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XUS in US$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) of gold
  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • One unit (20%) US stocks
  • 1 unit (20%) bonds

Market Outlook, May 2, 2016

Of the most common investment assets, right now Canadian stocks appear to offer the most opportunity, especially small cap stocks with a value style (buying cheap). Prices aren’t particularly low compared to earnings, but earnings may be depressed and could jump higher with an economic recovery. To be fair, we’ve been waiting for a recovery since 2009, and the Canadian market is still below it’s 2008 peak. Having said that, other stocks and bonds look expensive at the moment. Fewer American stocks are showing upward momentum compared to last week.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.51%, the short government bond yield is 0.72% and the long government bond yield is 1.92%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

When the dials point left, the credit environment is cautious and risks are priced higher. Currently, corporate bonds are in greater favour than government bonds, long-term are favoured over short-term, and there doesn’t seem to be a clear preference between high quality and high yield. It may be that yields are so low that investors prefer long corporate bonds. Although the economy isn’t robust, there doesn’t seem to be a lot of fear of bankruptcy.
guage1guage2guage3

Currency

The Brazilian Real (BZF), Japanese Yen (FXY), Canadian Dollar (FXC), Singapore Dollar (FXSG), Swedish Krona (FXS), Euro (FXE), Australian Dollar (FXA), Swiss Franc (FXF), and British Pound (FXB) are looking strong relative to the US dollar.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

Where does there appear to be more opportunity right now?
US bonds and US stocks both have an equally tepid outlook:
guage4
Canadian bonds are less desirable than Canadian stocks:
guage5

Global Markets

  • Brazil has risen 5.24% in price since last week’s close.
  • Japan has fallen -6.47% in price since last week’s close.

Comparing national stock markets, Peru (EPU), Brazil (EWZ), Russia (ERUS), Turkey (TUR), Norway (ENOR), Canada (EWC), New Zealand (ENZL), South Africa (EZA), UAE (UAE), Chile (ECH), Saudi Arabia (KSA), Australia (EWA), Austria (EWO), Spain (EWP), Sweden (EWD), United Kingdom (EWU), Denmark (EDEN), Thailand (THD), France (EWQ), Germany (EWG), Mexico (EWW), Singapore (EWS), Switzerland (EWL), Italy (EWI), Belgium (EWK), Netherlands (EWN), Hong Kong (EWH), South Korea (EWY), USA S&P 500 (IVV), Israel (EIS), Indonesia (EIDO), Finland (EFNL) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,065.30. This is -1.08% lower than last week’s price (2,087.79), and -0.36% lower than last month’s price (2,072.78), and 6.49% higher than the price three months ago (1,939.38), and -1.20% lower than the price six months ago (2,090.35), and -1.46% lower than the price one year ago (2,095.84).The average P/E ratio of the S&P 100 (equal weighted) is 21.46. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.66% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • California Resources Corporation (CRC)
  • Devon Energy Corporation (DVN)
  • Halliburton Company (HAL)
  • Conocophillips (COP)
  • Anadarko Petroleum Corporation (APC)
  • Amazon.com, Inc. (AMZN)
  • Norfolk Southern Corporation (NSC)
  • Bristol-myers Squibb Company (BMY)
  • Occidental Petroleum Corporation (OXY)
  • Chevron Corporation (CVX)
  • Union Pacific Corporation (UNP)
  • Schlumberger N.v. (SLB)
  • Exxon Mobil Corporation (XOM)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company (GM)
  • Ford Motor Company (F)
  • Metlife, Inc. (MET)

Canadian Stocks

Yesterday’s closing price was 13,951.50. This is 1.13% higher than last week’s price (13,796.00), and 3.80% higher than last month’s price (13,440.40), and 10.08% higher than the price three months ago (12,674.40), and 1.16% higher than the price six months ago (13,791.90), and -7.94% lower than the price one year ago (15,154.70).The average P/E ratio of the TSX60 (equal weighted) is 24.84. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.03% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • Kinross Gold Corp. (K.to)
  • First Quantum Minerals Ltd (FM.to)
  • Teck Resources Limited (TCK-B.to)
  • Yamana Gold Inc (YRI.to)
  • Barrick Gold Corporation (ABX.to)
  • Bombardier Inc., Cl. B, Sv (BBD-B.to)
  • Agnico Eagle Mines Limited (AEM.to)
  • Eldorado Gold (ELD.to)
  • Silver Wheaton Corp. (SLW.to)
  • Goldcorp Inc (G.to)
  • Encana Corp. (ECA.to)
  • Crescent Point Energy Corp. (CPG.to)
  • Franco-nevada Corporation (FNV.to)
  • Cenovus Energy Inc. (CVE.to)
  • Arc Resources Ltd. (ARX.to)
  • Cdn Natural Res (CNQ.to)
  • Pembina Pipeline Corporation (PPL.to)
  • Restaurant Brands International (QSR.to)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada, Sv (POW.to)
  • National Bank Of Canada (NA.to)

Other Assets

Base Metals (ZMT.to), Silver (HUZ.to), Crude Oil (HUC.to), Natural Gas (HUN.to), TSX Capped Composite (ZCN.to), Real Estate (XRE.to), Gold (IGT.to), USA S&P 500 (SPY) are performing better than cash.
The gold price is rising, which often indicates nervousness in equity markets.
The oil price is rising, which increases manufacturing input costs and energy costs and may slow economic expansion.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XUS in US$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) of gold
  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • 2 units (40%) cash

Market Outlook, April 25, 2016

guage5

Stocks are looking up in Canada, US and much of the rest of the developed world. The Canadian dollar is strengthening, along with the price of oil. I wouldn’t bet against either of them right now, although there’s no guarantee that they will continue to rise. Because of low earnings last year and last quarter, stocks don’t appear to present bargains. But a number of stocks are experiencing price increases that look set to continue for the near term.

In the last paragraph, I wondered why US stocks are performing better than cash, but aren’t in my model portfolio. The answer is the currency. If you buy US stocks hedged to CAD dollars, you will experience growth. But the falling USD dollar negates the growth of US stocks.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.51%, the short government bond yield is 0.68% and the long government bond yield is 1.93%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

When the dials point left, the credit environment is cautious and risks are priced higher.
guage1guage2guage3

Currency

The Brazilian Real (BZF), Canadian dollar (FXC), Australian dollar (FXA), Japanese Yen (FXY), Swedish Krona (FXS), Singapore dollar (FXSG), and Euro (FXE) are looking strong relative to the US dollar. Which is probably another way of saying that the US dollar is depreciating.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

Where does there appear to be more opportunity right now?
In the US market, stocks have the advantage.
guage4
Also, in the Canadian market.
guage5

Global Markets

Comparing national stock markets, Peru (EPU), Brazil (EWZ), Russia (ERUS), Turkey (TUR), Canada (EWC), South Africa (EZA), UAE (UAE), New Zealand (ENZL), Australia (EWA), Norway (ENOR), Sweden (EWD), Austria (EWO), Chile (ECH), Japan (EWJ), Singapore (EWS), Indonesia (EIDO), Hong Kong (EWH), Germany (EWG), Denmark (EDEN), France (EWQ), Belgium (EWK), Israel (EIS), United Kingdom (EWU), Spain (EWP), US S&P 500 (IVV), Qatar (QAT), Mexico (EWW), Switzerland (EWL), Thailand (THD), South Korea (EWY), Netherlands (EWN), Finland (EFNL), China (MCHI), Philippines (EPHE), India (INDA), and Malaysia (EWM) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,091.58. This is -0.13% lower than last week’s price (2,094.34), and 2.73% higher than last month’s price (2,035.94), and 11.43% higher than the price three months ago (1,877.08), and 3.60% higher than the price six months ago (2,018.94), and -1.38% lower than the price one year ago (2,120.79).The average P/E ratio of the S&P 100 (equal weighted) is 21.72. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.60% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • California Resources Corporatio (CRC)
  • Devon Energy Corporation Common (DVN)
  • Halliburton Company Common Stoc (HAL)
  • Conocophillips Common Stock (COP)
  • Anadarko Petroleum Corporation (APC)
  • Norfolk Southern Corporation Co (NSC)
  • Bristol-myers Squibb Company Co (BMY)
  • Blackrock, Inc. Common Stock (BLK)
  • Union Pacific Corporation Commo (UNP)
  • Occidental Petroleum Corporatio (OXY)
  • Schlumberger N.v. Common Stock (SLB)
  • Twenty-first Century Fox, Inc. (FOXA)
  • Chevron Corporation Common Stoc (CVX)
  • Bank Of New York Mellon Corpora (BK)
  • Twenty-first Century Fox, Inc. (FOX)
  • Capital One Financial Corporati (COF)
  • United Technologies Corporation (UTX)
  • Unitedhealth Group Incorporated (UNH)
  • Abbvie Inc. Common Stock (ABBV)
  • Caterpillar, Inc. Common Stock (CAT)
  • Gilead Sciences, Inc. (GILD)
  • Citigroup, Inc. Common Stock (C)
  • Johnson & Johnson Common Stock (JNJ)
  • Emerson Electric Company Common (EMR)
  • Fedex Corporation Common Stock (FDX)
  • Pfizer, Inc. Common Stock (PFE)
  • American Express Company Common (AXP)
  • Bank Of America Corporation Com (BAC)
  • Amazon.com, Inc. (AMZN)
  • Time Warner Inc. New Common Sto (TWX)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company Common S (GM)
  • Ford Motor Company Common Stock (F)

Canadian Stocks

Yesterday’s closing price was 13,874.00. This is 1.12% higher than last week’s price (13,719.80), and 3.86% higher than last month’s price (13,358.10), and 14.25% higher than the price three months ago (12,143.20), and -0.03% lower than the price six months ago (13,878.10), and -8.18% lower than the price one year ago (15,110.50).The average P/E ratio of the TSX60 (equal weighted) is 24.99. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.00% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • Kinross Gold Corp. (K.to)
  • First Quantum Minerals Ltd (FM.to)
  • Yamana Gold Inc (YRI.to)
  • Teck Resources Limited (TCK-B.to)
  • Barrick Gold Corporation (ABX.to)
  • Bombardier Inc., Cl. B, Sv (BBD-B.to)
  • Crescent Point Energy Corp. (CPG.to)
  • Encana Corp. (ECA.to)
  • Eldorado Gold (ELD.to)
  • Agnico Eagle Mines Limited (AEM.to)
  • Cdn Natural Res (CNQ.to)
  • Silver Wheaton Corp. (SLW.to)
  • Franco-nevada Corporation (FNV.to)
  • Goldcorp Inc (G.to)
  • Pembina Pipeline Corporation (PPL.to)
  • Dollarama Inc (DOL.to)
  • Husky Energy Inc. (HSE.to)
  • Arc Resources Ltd. (ARX.to)
  • National Bank Of Canada (NA.to)
  • Cenovus Energy Inc. (CVE.to)
  • Canadian Tire Corporation, Cl. (CTC-A.to)
  • Canadian Pacific Railway Limite (CP.to)
  • Inter Pipeline Ltd (IPL.to)
  • Saputo Inc. (SAP.to)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada, Sv (POW.to)
  • National Bank Of Canada (NA.to)

Other Assets

S&p/tsx Eqwt Glb Bm Hdgd T (ZMT.to), Silver Etf (HUZ.to), Natural Gas Etf (HUN.to), Crude Oil Etf (HUC.to), S&p/tsx Capped Composite E (ZCN.to), Spdr S&p 500 (SPY), S&p/tsx Capped Reit (XRE.to), Msci Eafe Cad-hedged (XIN.to) are performing better than cash.
The gold price is falling, which may indicate bullishness toward stocks.
The oil price is rising, which increases manufacturing input costs and energy costs and may slow economic expansion.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XUS in US$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • 3 units (60%) cash

Market Outlook, April 18, 2016

guage (4)

The oil price has dropped, which hurts the outlook for the Canadian market. Stocks still look slightly more attractive than bonds, both in Canada and the US. Strangely, Canadian small caps have outpaced large caps for the past couple weeks, and appear positioned to continue. It’s a good time to find bargains (if your expectations for the future aren’t too grim) and relative safety. Cheap REITs may the the best bet for the moment.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.49%, the short government bond yield is 0.58% and the long government bond yield is 1.84%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

When the dials point left, the credit environment is cautious and risks are priced higher.

Corporate bonds have the advantage over governments:
guageLong bonds are outperforming short bonds:

guage (1)

High quality bonds are preferable to high yield bonds:

guage (2)

Currency

The Brazilian Real (BZF), Japanese Yen (FXY), Australian Dollar (FXA), Canadian Dollar (FXC), Singapore Dollar (FXSG), Swedish Drona (FXS), and Euro (FXE) are looking strong relative to the US dollar.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

Where does there appear to be more opportunity right now?
US bonds vs. US stocks: stocks have a better outlook.
guage (3)
Canadian bonds vs. Canadian stocks: stocks look better, today.
guage (4)

Global Markets

  • Australia has changed 6.88% in price since last week’s close.
  • Brazil has changed 7.64% in price since last week’s close.
  • Peru has changed 14.23% in price since last week’s close.
  • South Africa has changed 5.69% in price since last week’s close.

Comparing national stock markets, All Peru Et (EPU), Brazil Inde (EWZ), Turkey Investable (TUR), New Zealand (ENZL), Russia (ERUS), South Africa (EZA), Uae (UAE), Canada (EWC), Chile Inves (ECH), Sweden (EWD), Australia Fu (EWA), Philippines (EPHE), Denmark (EDEN), Belgium Inv (EWK), Malaysia Fun (EWM), Singapore Fu (EWS), Hong Kong Fu (EWH), Norway (ENOR), South Korea (EWY), Ishares Core S&p 500 (IVV), Thailand In (THD), India (INDA), Netherlands (EWN), China (MCHI), Ireland (EIRL), Israel Inve (EIS), Japan (EWJ), Switzerland (EWL), Mexico Inve (EWW), Qatar (QAT), Germany (EWG), Austria Inv (EWO), Indonesia (EIDO), France (EWQ), Finland (EFNL), Taiwan (EWT), United Kingdom (EWU) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,080.73. This is 1.90% higher than last week’s price (2,041.99), and 1.97% higher than last month’s price (2,040.59), and 10.66% higher than the price three months ago (1,880.33), and 4.34% higher than the price six months ago (1,994.24), and -2.12% lower than the price one year ago (2,125.85).The average P/E ratio of the S&P 100 (equal weighted) is 21.43. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.67% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • Amazon.com, Inc. (AMZN)
  • Caterpillar, Inc. (CAT)
  • Accenture Plc  (ACN)
  • Visa Inc. (V)
  • United Technologies Corporation (UTX)
  • Emerson Electric Company (EMR)
  • Devon Energy Corporation (DVN)
  • Texas Instruments (TXN)
  • FedEx Corporation  (FDX)
  • Mcdonald’s Corporation  (MCD)
  • Amgen Inc. (AMGN)
  • Blackrock, Inc.  (BLK)
  • Bristol-myers Squibb Company (BMY)
  • Honeywell International Inc. (HON)
  • 3M Company (MMM)
  • Merck & Company, Inc. (MRK)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company (GM)
  • Ford Motor Company (F)

Canadian Stocks

Yesterday’s closing price was 13,637.20. This is 1.60% higher than last week’s price (13,422.80), and 0.12% higher than last month’s price (13,621.30), and 14.19% higher than the price three months ago (11,942.20), and -1.39% lower than the price six months ago (13,829.00), and -9.52% lower than the price one year ago (15,072.80).The average P/E ratio of the TSX60 (equal weighted) is 24.71. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.05% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada, Sv (POW.to)
  • Potash Corp Of Sask Inc (POT.to)
  • National Bank Of Canada (NA.to)

Other Assets

Base metals (ZMT.to), Silver (HUZ.to), TSX Capped REIT (XRE.to), S&P 500 (SPY), TSX Capped Composite E (ZCN.to), Canadian Universe Bond (XBB.to), Crude Oil (HUC.to), MSCI EAFE Cad-hedged (XIN.to) are performing better than cash.
The gold price is falling, which may indicate bullishness toward stocks.
The oil price is rising, which increases manufacturing input costs and energy costs and may slow economic expansion.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XUS in US$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • 3 units (60%) bonds

Market Outlook, April 11, 2016

guage5

It appears that the market is taking a breather, waiting for financial data to catch up to the optimistic outlook that seemed to command the last couple weeks. This week looks like it will be flat at best. That also means it will probably be a little easier to find value this week than earlier.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.46%, the short government bond yield is 0.56% and the long government bond yield is 1.82%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

When the dials point left, the credit environment is cautious and risks are priced higher.

Corporate bonds are performing slightly better than governments, but both are positive.
guage1

Long bonds are the place to be, although I couldn’t say why.

guage2

High quality have momentum, while high yield are out of favour.

guage3

In sum, long-term high-quality corporate bonds appear to be most in favour.

Currency

The Japanese Yen (FXY), Brazilian Real (BZF), Swedish Krona (FXS), Swiss Franc (FXF), Euro (FXE), Canadian dollar (FXC), Singapore dollar (FXSG), Australian dollar (FXA), Chinese Yuan (FXCH) are looking strong relative to the US dollar.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

Where does there appear to be more opportunity right now?
US bonds vs. US stocks:
guage4
Canadian bonds vs. Canadian stocks:
guage5

Global Markets

Comparing national stock markets, Turkey (TUR), Brazil (EWZ), New Zealand (ENZL), Russia (ERUS), Peru (EPU), South Africa (EZA), Chile (ECH), Malaysia (EWM), Denmark (EDEN), Philippines (EPHE), Belgium (EWK), Canada (EWC), Ireland (EIRL), Indonesia (EIDO), USA S&P 500 (IVV), South Korea (EWY), Poland (EPOL), Netherlands (EWN), Hong Kong (EWH), Mexico (EWW), Austria (EWO), Sweden (EWD), Singapore (EWS) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,047.60. This is -0.90% lower than last week’s price (2,066.13), and 2.92% higher than last month’s price (1,989.57), and 6.53% higher than the price three months ago (1,922.03), and 2.59% higher than the price six months ago (1,995.83), and -2.42% lower than the price one year ago (2,098.48).The average P/E ratio of the S&P 100 (equal weighted) is 21.02. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.76% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • Fedex Corporation Common Stock (FDX)
  • Mcdonald’s Corporation Common S (MCD)
  • Philip Morris International Inc (PM)
  • Accenture Plc Class A Ordinary (ACN)
  • Emerson Electric Company Common (EMR)
  • Visa Inc. (V)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company Common S (GM)
  • Ford Motor Company Common Stock (F)
  • Metlife, Inc. Common Stock (MET)

Canadian Stocks

Yesterday’s closing price was 13,396.70. This is 0.45% higher than last week’s price (13,336.20), and 0.13% higher than last month’s price (13,379.10), and 8.75% higher than the price three months ago (12,319.30), and -3.40% lower than the price six months ago (13,868.40), and -10.95% lower than the price one year ago (15,043.20).The average P/E ratio of the TSX60 (equal weighted) is 24.48. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.09% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Potash Corp Of Sask Inc (POT.to)
  • Power Corporation Of Canada, Sv (POW.to)
  • National Bank Of Canada (NA.to)
  • Canadian Imperial Bank Of Comme (CM.to)
  • Bank Of Nova Scotia (BNS.to)

Other Assets

TSX Capped REIT (XRE.to), S&P 500 (SPY), Canadian Universe Bond (XBB.to), Silver (HUZ.to), Global Infrastructure (ZGI.to), Gold (IGT.to) are performing better than cash.
The gold price is neutral.
The oil price is falling, which benefits manufacturers, but hurts the Canadian economy.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XUS in US$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) real estate
  • 4 units (80%) bonds

Sell Discipline

A couple weeks ago, I got a little bit of money together and bought some stocks. Markets are a bit lower than a year ago, so it’s pretty hard to go wrong. Knowing which stocks to buy isn’t easy, but it’s not rocket science either. In the past, I’ve invested for value, for income and for momentum. I’ve had both good and bad luck and I’ve made both good and bad decisions. As an aside, my worst decision was “catching a falling knife.” Based on my experience and my understanding, my strategy is mainly a value approach, leaning toward GARP.

Now that I own stocks, I’m faced with new questions, to which I was insufficiently attentive before. Was I right or wrong to buy them? How can I tell if I was wrong? Right or wrong, when do I sell? The sell decision has just as much impact on long-term success as the buy decision, but less attention is paid to getting it right (70 per cent of the companies polled were not approaching the selling of stocks in a “highly disciplined” manner). Most investment managers articulate one or more of these three approaches to the sell decision: “when a price target is hit, an investment thesis has changed, or when a more desirable investment is found.”

Setting a target price for a stock at the time of purchase is a good idea. It helps an investor to quantify their expectation for a stock investment. Further, it gives a benchmark to evaluate stock performance over time. It doesn’t necessarily force the investor to sell the stock when the target is reached, but it provides a hint that the stock research should be re-done. This is an optimistic approach that answers the question: Was I right? When a stock reaches a target, I was right. Based on research, I can then either set a new target, take profit or sell the position.

The other two approaches, a change that affects the investment thesis and finding a more desirable investment, begin to address the cases where I was wrong. But I notice that both approaches skirt the possibility of making a mistake, and blame the problem on external factors: something in the environment has changed or it’s only performing poorly by comparison to others. (Avoiding responsibility is a subconscious human reaction.) But it also underlines the fact that it’s very hard to determine if a decision was right or wrong, especially based on a stock price that fluctuates by the second.

My preferred approach is based on program evaluation. It starts by asking: What is the purpose of the (investment) program? Possible answers may include: market-based return, beating the market, income, safety, meeting financial planning targets or being part of the next big thing. Next, each stock that goes into the portfolio should have a purpose, e.g. income, capital growth, diversification or speculation. Each should also have an evaluation criteria, e.g. income level, target price, volatility. Once a stock has been chosen and its purpose and evaluation criteria set, it is added to the portfolio. The buy portion is complete.

The sell portion begins after the purchase is made. I will suggest that the portfolio and each of its holdings should be evaluated somewhere between monthly and quarterly. Compare each stock against its criteria, based on its purpose in the portfolio. Is it meeting its objective, missing, or falling far short? Has anything changed?  If the stock is performing to expectations, no action is required, although targets may be updated. If it is exceeding expectations, the manager will have to decide between adding to the position (greater potential) and trimming the position (greater safety). If it is missing targets, the manager will have to decide between adding to the position (greater risk and potential) and cutting losses. If the stock is falling far short, it is probably best to admit a mistake and close the position, freeing up the capital for a better opportunity.

Setting a target price or income level makes sense over a long period of time, but evaluating progress quarterly will probably most make sense in comparison to the market. If the price of my stock is down, further from its target, but less than the market, I will assume that’s good news since it has performed better than expected, given prevailing headwinds.

The decision to sell is not an easy one. There is no clear signal that the best profit has already been earned or that the purchase was a mistake. But this reliance on judgement is what makes investment management so interesting.

 

Market Outlook, April 4, 2016

guage-4

In talking with a portfolio manager and in looking at the data, it appears that the market is taking a breather after rallying too far, too fast. The quick, deep correction in January was painful, and it was hard to see what fundamental information caused the pessimism. The outlook wasn’t good, but it hadn’t been for months. When the correction had run its course, the market rallied, again without the support of fundamental data. Both market movements seemed due to investor sentiment.

With many companies having completed Q4 reporting, the news wasn’t great. It wasn’t worse than expected, but it was positive enough to justify a rally of almost 10% over a month and a half. All this to say that the outlook is uncertain and stocks, while they looked attractive a couple weeks ago, could fluctuate quite a bit over the coming weeks.

Interest Rates

yieldcurve

The 30-day T-bill rate is 0.44%, the short government bond yield is 0.53% and the long government bond yield is 1.86%. The yield curve is normal. Long government bonds appear very overvalued. There seems to be very little opportunity for profit in bonds. A safe haven, such as tangible assets (eg. precious metals, real estate, etc.), may be a better bet.

Credit Environment

Corporate bonds (riskier) are performing better than government bonds (safer):
guage

Long-term bonds are performing better than short-term bonds:guage-1

High quality (safer) bonds are preferable to high yield bonds (riskier):guage-2

Currency

The Brazilian Real (BZF), Swedish Krona (FXS), Australian Dollar (FXA), Japan Yen (FXY), Euro (FXE), Swiss Franc (FXF), Singapore Dollar (FXSG), Canadian Dollar (FXC), and Chinese Yuan (FXCH) are looking strong relative to the US dollar.
The Canadian dollar has been appreciating compared to the US dollar.

Equities

In both cases, bonds and stocks have approximately equal momentum.
US bonds vs. US stocks:
guage-3
Canadian bonds vs. Canadian stocks:
guage-4

Global Markets

Comparing national stock markets, Peru (EPU), Brazil (EWZ), Turkey (TUR), New Zealand (ENZL), Poland (EPOL), Chile (ECH), Russia (ERUS), Philippines (EPHE), Indonesia (EIDO), South Africa (EZA), Austria (EWO), Mexico (EWW), Malaysia (EWM), Canada (EWC), Ireland (EIRL), South Korea (EWY), Thailand (THD), Denmark (EDEN), Belgium (EWK), USA S&P 500 (IVV), Netherlands (EWN), Qatar (QAT), Singapore (EWS), Taiwan (EWT), Sweden (EWD), UAE (UAE), Germany (EWG), and Israel (EIS) are rising, while other regions appear to be neutral or falling.

US Stocks

Yesterday’s closing price was 2,072.78. This is 1.75% higher than last week’s price (2,037.05), and 3.98% higher than last month’s price (1,993.40), and 1.41% higher than the price three months ago (2,043.94), and 7.96% higher than the price six months ago (1,920.03), and -0.35% lower than the price one year ago (2,080.15).The average P/E ratio of the S&P 100 (equal weighted) is 21.29. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.70% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

  • Accenture Plc (ACN)
  • Exelon Corporation (EXC)
  • Fedex Corporation (FDX)
  • Facebook, Inc. (FB)
  • Mcdonald’s (MCD)
  • Philip Morris International (PM)
  • Emerson Electric Company (EMR)
  • Verizon Communications Inc. (VZ)
  • International Business Machines (IBM)
  • Oracle Corporation (ORCL)
  • Southern Company (the) (SO)
  • Microsoft Corporation (MSFT)
  • Coca-cola Company (the) (KO)
  • Unitedhealth Group Incorporated (UNH)
  • AT&T Inc. (T)

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • General Motors Company (GM)
  • Ford Motor Company (F)
  • Metlife, Inc. (MET)

Canadian Stocks

Yesterday’s closing price was 13,440.40. This is 0.37% higher than last week’s price (13,390.20), and 2.41% higher than last month’s price (13,123.70), and 3.97% higher than the price three months ago (12,927.20), and 1.00% higher than the price six months ago (13,307.00), and -11.42% lower than the price one year ago (15,173.90).The average P/E ratio of the TSX60 (equal weighted) is 24.74. This implies the market is overvalued. There is likely an overly optimistic outlook and risks may be unduly discounted. This implies a forward capital return of 4.04% (before dividends).

The following stocks appear to present short-term (2-6 months) opportunities for price increase (buy high, sell higher):

These stocks appear to be priced attractively from a long-term (3-5 years) perspective (buy low, sell high):

  • Power Corporation Of Canada, Sv (POW.to)
  • National Bank Of Canada (NA.to)
  • Potash Corp Of Sask Inc (POT.to)
  • Canadian Imperial Bank Of Comme (CM.to)

Other Assets

TSX Capped REIT (XRE.to), S&P 500 (SPY), TSX Capped Composite (ZCN.to), Natural Gas (HUN.to), Canadian Universe Bond (XBB.to) are performing better than cash.
The gold price is falling, which may indicate bullishness toward stocks.
The oil price is falling, which benefits manufacturers, but hurts the Canadian economy.

Portfolio

A theoretical portfolio, split evenly between gold (IGT in Cdn$), real estate (XRE in Cdn$), Canadian stocks (XIU in Cdn$), US stocks (XUS in US$), international stocks (VDU in Cdn$) and bonds (XBB in Cdn$).

As of today, the theoretical portfolio would hold:

  • One unit (20%) real estate
  • One unit (20%) Canadian stocks
  • One unit (20%) US stocks
  • 2 units (40%) bonds