Market Outlook October 12, 2015

Happy Thanksgiving! The TSX is closed for the holiday.

The TSX had a much better week last week, rising almost 5%. It’s still lower than one year ago, but the outlook is now a lot less bleak. The Canadian dollar is just starting to make gains on the USD. Interest rates are stable and bond values are retreating.

Gold (IGT) maintains the best momentum among the various asset classes. Having said that, its momentum is not great and the situation could change with little warning. At the same time, four of the top five TSX60 stocks (by momentum) are gold producers. The other is COS, which was the subject of a takeover bid. In the US, the top momentum stocks are still Nike (NKE) and Amazon (AMZN), with EMC and GE sneaking just above Google.

And what’s this? Is oil beginning to rebound? The bottom may be behind us. This will be something to watch.

Market Outlook October 5, 2015

The market was bumpy last week. It finished the week about where it started, after falling, rising, falling and rising again. If it’s nerve-wracking, you’re following too close.

Interest rates are generally unchanged. Inflation is relatively low. I don’t believe it’s possible to make money in bonds right now. Gold (IGT) may be the safest place to be right now. There aren’t a lot of positives in the market. Certainly not oil. Chinese stocks and Hong Kong stocks are starting to make upward movements and will be interesting to keep an eye on. As a side note, the Chinese currency is doing about as well as the US dollar.

There are very few individual stocks with positive momentum. It’s mainly the same as in prior weeks, with the exception of VRX (which fell down). DOL, CSU, ATD.B, in Canada, continue to appear attractive. A new addition, if you’re looking for a gold stock, is Agnico Eagle (AEM). In the US, the best bets appear to be NKE, AMZN, LLY and GOOGL.

Market Outlook September 28, 2015

The stock market was a disappointment over the past week. The TSX lost 2% on the week. It is down about 10% over the past three months, which is no fun at all. Even bonds had a negative week. Correlation between stocks and bonds is clearly not stable, and isn’t even always negative.

Gold (IGT) is the only asset with positive momentum, hinting at good short-term performance. It’s considered a safe haven during volatile times, so that stands to reason. Oil still looks scary, but not as scary as Brazil stocks.

Last week, I suggested a handful of Canadian and US stocks that appeared interesting. Dollarama (DOL), Alimentation Couche-Tard (ATD.B) and Constellation Software (CSU) still have good momentum, but Valeant (VRX) started dropping and appears out of favour. In the US, only Nike (NKE) and Amazon (AMZN) have good momentum, with others appearing less likely to produce short-term gains.

The market is struggling, and very few stocks can overcome the headwind.

Market Outlook September 21, 2015

September’s just not a very fun month to be in the markets. The TSX rose 1.4% over the past week. That’s better than nothing, but it’s still 10.6% lower than a year ago. Short-term interest rates have fallen (the overnight and 30-day T-bill rates), so that now the yield curve is normal. All other things being equal, lower interest rates should help to stimulate spending and business investment. The Canadian dollar, on the other hand, continues to struggle against the US dollar.

No asset class looks like it has the potential for a good short-term return. Even gold has turned slightly negative. Oil is starting to flatten out. But nothing is looking up.

In Canada, Valeant (VRX) looks attractive again. The other companies that I mentioned last week, Alimentation Couche-tard (ATD.B), Constellation software (CSU) and Dollarama (DOL) still look good. In the US, Amazon (AMZN) looks attractive, with Facebook (FB) and Nike (NKE) also showing potential for short-term gains.

Market Outlook September 14, 2015

The stock market continues to struggle. It fell 1.3% over the past (shortened) week. Not only does the stock market in Canada, in the US and in the other countries that I watch have negative momentum, but bonds also have a slightly negative outlook. It’s not a fun time for investors. Gold (IGT) is the exception again this week, with a glimmer of a positive outlook, despite turning in a loss (-1.3%) for the past week.

Interest rates remain low. The yield curve is flat from 30 days to 3 years, but normal from 3 years to 10 years. At least it isn’t inverted. Inflation is low, but at least we don’t have deflation.

Okay, I’m having a hard time finding the silver lining. There are hardly any attractive stocks at the moment. In Canada, I would look at Dollarama (DOL), Bombardier (BBD.b) and Constellation Software (CSU). In the United States, only Amazon (AMZN) appears to have potential.

I didn’t realize that the indices are revised every quarter. When I hear commentators talking about passive investing, I assumed that the index was a relatively stable collection of stocks. Not having updated my list of TSX 60 and S&P 100 constituents for a while, I found more changes than I expected. I won’t guess at the turnover in percentage, but this leads me to question the suitability of any index for benchmarking or investing because of the introduction of selection bias and survivorship bias.

Market Outlook September 7, 2015

The TSX is closed for trading today for the Labour Day holiday. And thank goodness, given the kind of week it was last week. Maybe the market can sit quietly in a corner and think about what it’s done. -2.8% over the past five business days, for anyone who wasn’t keeping score.

Gold (IGT) is the only asset class with a positive outlook. That, in itself, is pretty pessimistic. Oil lost a lot of ground over the past few weeks, but there are other asset classes that have a worse outlook, including emerging market and BRIC stocks. Yikes.

The Yen is now showing strength compared to the US dollar, but the Canadian dollar doesn’t look ready to make up any lost ground. Too bad it’s not easy for a Canadian individual investor to buy gold in Yen. Because there are no (large-cap) stocks in Canada or the US that appear attractive at this point.

Market Outlook August 31, 2015

I was on vacation, and didn’t have access to wifi for the past couple weeks. I’m back now, and ready to take a look at the markets.

What the heck happened to oil? Crude lost a lot of value, but it climbed back a bit on Thursday and Friday. I don’t know if that’s the result of increased volatility, or if it’s stabilising.

The stock markets aren’t doing much better. Everything has negative momentum, even bonds (which are the least bad). Gold is the only asset that has positive momentum (beside cash, which always hovers just above zero). Gold is up 4% over the past month, but moved 2.3% lower over the past week. It’s no guarantee, but it appears to be the best place to preserve capital at the moment.

The Canadian dollar, which tends to follow the trend of oil prices, continues to suffer compared to the US dollar. The Swiss franc is no longer attractive, but the Euro and the Yen have some small advantage over the US dollar.

All the stocks that I mentioned in recent posts appear to have levelled off or come back down to Earth. There is no obvious place to find growth for investors right now. The best short-term bet seems to be buying gold in USD.

Market Outlook July 27, 2015

It’s not a fun time to be invested in stocks. The TSX is down 1.4% on the week. It’s 4.2% lower than a month ago and almost 8% lower than three months ago. It appears to be moving in the wrong direction (or there’s a big sale on stocks). Further, he 3-year government bond is lower than the 30-day T-bill, which is an inversion of that portion of the yield curve. The 10-year yield is still higher, but that’s small comfort.

The only asset class that has positive momentum is bonds, with the exception of cash (which is always right around zero). Oil looks less appealing than ever, which is not good for the Alberta economy. On the other hand, it reduces the input costs for manufacturing companies, which should support US and Ontario economies. For that reason, I’m not really surprised to see the US dollar doing well compared to other major currencies.

In Canada, Valeant (VRX) continues to run away. Why didn’t I buy and hold that about two years ago? I ask myself that, but the obvious answer is that I couldn’t have foreseen this type of growth. In the US, Google (GOOG) continues to look impressive and Amazon (AMZN) looks as promising as Valeant at the moment.

Market Outlook July 20, 2015

I have not much to say about the markets. The TSX really hasn’t changed must compared to last week. Inflation has ticked up a basis point, interest rates are down a little, and the Canadian dollar is worse compared to the US dollar. The American dollar is actually appreciating compared to all currencies.

Looking at various markets and assets, European stocks appear modestly attractive, but nothing else does. (OIL looks downright awful.)

The only change in individual stocks is Google (GOOG), which experienced a huge jump. I assume it’s due to their recent earnings announcement. The best way to benefit from that would have been to own stock before the announcement, but it may continue to run a little further yet.

Market Outlook July 13, 2015

The TSX dropped almost 2% over the past week. It’s a little surprising to see that the American markets were flat over the same time period. To make matters worse, the Canadian dollar continues to fare poorly compared to the US dollar.

Every asset class that I compare has negative momentum, and for the first time in the years that I’ve been observing the markets, cash is the only safe haven. Oil has the worst outlook of anything, and the emerging markets, especially China and Brazil, look scary.

The same stocks that I mentioned last week still look attractive, in both the US and Canada, with one exception. Agrium looks weaker, now, and Telus (T) appears somewhat attractive.