Over the past week, stocks rose about 0.5% and bonds fell about 0.5%. However, stocks still lack momentum, given that the market is 1.2% lower than 50 days ago and 8.3% lower than 200 days ago. Bonds, on the other hand, are 2.2% higher than 200 days ago. Traders (and investors) still seem hesitant to buy risky assets (including stocks). Positive performance is moving stocks back toward positive momentum, but it will still take a little time. Further, last time they approached positive momentum, the following weeks were consistently negative. There are no guarantees that stocks are about to perform well.

The real estate sector, however, has been fairly consistent in producing favourable performance over the past couple months. I will continue to own real estate (XRE) over the coming week. There’s really no other sector that is performing consistently well.

My fair value estimate has risen slightly, along with the market value. Capital remains cautiously deployed, with preference given to the most stable governments and corporations. Now that summer is coming, people will have better things to do than research companies and read financial statements. I hold little hope that the summer months will be better than what we have experienced over the past six months or so.

Market Outlook April 30, 2012

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