Check in with the markets

I’ve been watching the markets a little closer than in the past. I’m impressed with a confluence of factors that I think makes the present situation unique.

The US dollar is performing better than most other currencies. The US stock market, especially large caps (represented by the S&P 500) is out-performing other markets. US small caps follow closely behind. Looking longer-term into the past, we see that the US stock market has outperformed Canadian stocks in most periods outside of 2000-2008, which was a resource boom.

If someone were to ask me today: “I have an extra $100,000 cash that I’d like to put to work, what would you advise?” I’d suggest investing it in US large cap stocks. An investor could do this by buying an ETF, such as XUS or ZSP or VFV (all unhedged). These ETFs are offered by iShares, BMO and Vanguard respectively, but I have no idea of how the offerings differ. Another option would be to buy a mutual fund. I can’t offer any possibilities at the moment.

Finally, it would be possible to buy individual stocks. This would mean opening a US dollar trading account (at your brokerage), converting your currency to fund the account, then buying stocks on a US exchange: NYSE, NASDAQ, etc. You could possibly buy the top 40 or 50 stocks from this list: This approach will require more active supervision of your holdings.

None of the foregoing constitutes advice. I don’t know your personal situation. If you need professional advice, talk to your advisor or broker.


I’ve started work again with an investment firm. As such, I think it’s best to stop posting updates. As I learn my role and find out more about the job, I’ll evaluate whether or not it makes sense for me to continue an independent investment update.

For anyone who is interested in consulting my momentum data, you can find it here:

I take no responsibility for the results. It is based essentially on an exponential moving average. It draws data from Yahoo Finance and automatically calculates the output. Because of the hits on Yahoo’s server, and the fact that it uses closing prices, it would be unwise to update it more than daily.

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.