Market Outlook May 18, 2015

Not much has changed since last week. Plus, today is a holiday!

Interest rates and inflation have remained relatively steady. Bonds barely moved lower in price. However, gold jumped up a little higher. Stocks continue to have more momentum than bonds. Having said that, the economy doesn’t appear very strong.

Comparing various asset classes, Chinese stocks (FXI) still appear the most appealing. They are slightly lower than four weeks ago, but higher than at any point before that. Hong Kong stocks (EWH) have almost as much momentum.

Canadian large caps (XIU) have just turned negative. Anyone who has geographic weightings in their portfolio should be underweight Canada. European stocks (XIN) or US large caps (SPY) may be good candidates for an overweight position.

Among US large caps, the only individual stocks that really look attractive are Amazon (AMZN), Microsoft (MSFT) and Nike (NKE). The shoe company is a new addition this week. Among Canadian stocks, the pickings appear equally slim, with just three attractive stocks: VRX, FM and AEM, just like last week.

Market Outlook May 11, 2015

The past week wasn’t great for stocks. In fact, most asset classes fell in value, except gold, US large caps and US small caps. Interest rates rose, and the yield curve looks a little healthier. Having said that, the economy isn’t strong, but this environment should provide a little more support for future business growth.

Chinese stocks (FXI) continue to present the greatest momentum, but the rate has shrunk considerably. I would be at all surprised to see its momentum disappear by next week. However, among the remaining asset classes, there isn’t much positive outlook. Only European stocks (XIN) looks okay, but only because it’s stayed relatively unchanged over the past month.

Even individual stocks are losing their momentum. In Canada, Valean (VRX) continues to amaze me. First Quantum Minerals (FM) also appears attractive. If you want to gamble on mining stocks, you could also look into Pacific Rubiales (PRE) or Sherritt (S). In the US, only Amazon (AMZN), Freeport (FCX) and Microsoft (MSFT) look attractive among the S&P100. I’m seeing a trend among mining stocks, and it may be their time right now.

Stock Market Outlook May 4, 2015

Looking across the asset classes (ETFs) that I review each week, just about everything is down compared to the prior week: bonds, gold, foreign stocks, US stocks, small caps, large caps. The one exception is real estate (XRE), which hasn’t fared too badly over the past few weeks.

Having said that, Chinese stocks (FXI) still have huge momentum. Besides that, only Hong Kong stocks (EWH) and European stocks (XIN) have decent momentum.

Looking at individual stocks, I spotted a new US stock that may bear further research : Freeport McMoRan (FCX). Microsoft (MSFT), Amazon (AMZN) and Disney (DIS) also continue to appear attractive.

In Canada, four stocks are very much ahead of the pack: First Quantum Minerals (FM), Valeant (VRX), Penn West (PWT) and Canadian Oil Sands (COS).

Market Outlook April 27, 2015

Markets have been rough lately, and haven’t really gone anywhere. We finally hit a new high for the TSX60 compared to late February and mid-September. Put another way, the stock market has made no progress in over seven months. Bonds were at a low point last September and have advanced since then. Bonds made no headway at all between September, 2011 and January 2015. Since then, they’ve advanced 3.25%.

But bonds have almost no momentum. Chinese stocks (FXI) are still way out in the lead, with Brazin stocks (EWZ), Hong Kong stocks (EWH) and emerging market stocks (XEM) following. Just comparing Canadian and American stocks, they have about equivalent positive momentum.

Last week, I pointed out Amazon (AMZN). Well, it jumped 14% this past Friday. That worked out well. This week, AbbVie (ABV) and Microsoft (MSFT) also appear attractive.

In Canadian large caps, a number of stocks all have good momentum: PWT, COS, CCT, VRX, FM, CCO and ERF. That’s enough to create a tidy portfolio. Having said that, “sell in May and go away,” is coming up in just five weeks. This may well be a last hurrah before the summer.

Market Outlook April 20, 2015

Inflation is a bit higher. What’s strange is that core inflation (2.4%) is higher than top line inflation (1.2%). That means fuel and food costs have very low inflation (or deflation), which I can see at the gas pumps. Normally, that should result in a “wealth effect”, where people spend more money elsewhere, since they’re saving it on gas. But in Alberta, that was pre-empted by the announcement of tax increases.

Surprisingly, Chinese stocks (FXI) are holding up, hardly changed from last week’s big jump. Emerging stocks (XEM) and European stocks (XIN) both have decent momentum. Canadian large caps (XIU) also look okay, better than US large and small caps.

I’m surprised to see this penny stock on the TSX60. If you like playing with fire, Penn West (PWT) appears to have potential. Canadian Oil Sands (COS) has similar momentum, but seems far more attractive. CCT and VRX continue to present impressive momentum, and now ERF can be added to that list. I’m happy to see so many good performers.

American stocks are struggling, so it’s harder to find opportunities. Amazon (AMZN) still appears well-positioned. Apache Corp (APA), an independent energy company, is the only other company that seems to have good momentum.

Market Outlook April 13, 2015

Interests rates inched up and, consequently, bonds fell back a little. Stocks continue to move ahead. The TSX 60 has hit a new high compared to any week since September 12, 2014. That means we’re back at the same level we were exactly seven months ago.

Remember what I said last week about Chinese stocks having the best momentum? And that I would ignore it, because it seemed to be a blip from a few months ago that was still working its way through the model? Well Chinese stocks (FXI) has a mind-bogglingly good week.

Chinese stocks (not surprisingly) continue to dominate the momentum. The funny thing about stock markets is that performance is generally asymmetrical. They rise slowly most of the time, but they fall quickly. The movements aren’t random, but fortunes are won slowly and lost quickly. It takes a lot of patience to win, but just one mistake to lose. Maybe that’s why human beings are generally terrible at investing.

Market Outlook April 6, 2015

Happy Easter! Markets were closed for Good Friday, but are open again today during regular hours.

Interest rates have fallen again, and are extremely low. That doesn’t reflect confidence in the economy. In fact, the interest rate and inflation rate indicators imply quite a weak economy.

My momentum model shows Chinese stocks (FXI) have the most promising outlook. However, it has had large, single-week jumps a couple times over the past few months, and I wouldn’t act on it this time. European stocks (XIN) still have good momentum, and holding it would keep transaction costs down.

Market Outlook March 30, 2015

Stock market outlook: not that great. I am seeing a lot of volatility, which doesn’t bode well. Investors don’t like volatility, and tend to respond by moving to safety. Interest rates have risen a little, but the economy still does not look strong. Man, this correction that began in 2008 is sure dragging on!

European stocks still have the momentum advantage. Having said that, they don’t have a great deal of momentum. Not to mention that my model, while performing quite well over 14 years, has recently shed a lot of value. It peaked on May 7, 2014 (beginning with a backtest going to Jan 1, 2000). In the ensuing year, it has lost about 30%. It has been very volatile, but never to this extent, especially when the TSX 60 was relatively stable.

In US stocks, WAG, UNH and BMY still appear relatively attractive. LOW has dropped off and been replaced by TGT.

In Canadian stocks, only VRX looks really attractive, and that comes mainly from a price spike in late February. Lately, the trend has been downward (or reversion to the mean).

Market Outlook March 23, 2015

Interest rates have fallen again. Normally I would suggest that bond values are higher, but this time I’m going to point out that interest rates are volatile. The economy is less predictable than usual and optimism does not appear to be high.

The asset rotation model continues to favour XIN. Either European stocks are doing well or the Canadian dollar is doing badly (or both). But I don’t trade currencies, so I’m not really interested in which it is.

Canadian stocks that look appealing include VRX, BAM.A and AGU.

American stocks that may be profitable in the short term include BMY, MAG and UNH.

Market Outlook March 8, 2015

Interest rates have bounced back up (a bit) from rock bottom, where they were last week. As a result, bond values fell. China also fell, right when I thought it was an attractive buy. Ouch! It looks like it’s back to holding European stocks (XIN).

Some American names that look promising, along with those I mentioned last week, include UnitedHealth Group (UNH) and Bristol-Myers Squibb (BMY).

Canadian names from last week also remain attractive, but now include Brookfield Asset Management (BAM.a).

In other news, the Apple Watch announcement is today. I’m not buying one until it’s suitable for swimmers.