Stocks did better this week, recovering somewhat from their low close last Friday. The TSX still appears to be about 10% undervalued, however. Volatility has been higher, between 20 and 25, although still not high enough to be concerned about a market crash. A bear market also seems unlikely because interest rates remain low.
There has been almost no change in relative momentum. Bonds continue to outpace stocks. The global economic outlook is not optimistic, which translates into money remaining in (or flowing into) bonds. A balanced fund would do well to maintain an overweight in bonds at this point. An asset allocation strategy, on the other hand, would continue to own real estate (XRE), as I will. Having said that, the momentum of real estate is barely higher than bonds, so there’s a possibility of seeing a shift in the near future.