The Canadian stock market is closed today in lieu of Canada Day. American markets will be closed on July 4th. Normally on weeks that include holidays, the volume is lighter and there tends not to be any large moves.

The momentum of bonds continues to outweigh that of stocks, however it appears to be nearing a reversal. I’ve said that before and the momentum didn’t quite move in the favour of stocks, so it would be premature to make a prediction. However, it’s time to start paying attention. With regards to asset rotation, US small caps (IWM) have come into favour. That will be tricky, because I want to sell a Canadian ETF (IGT) to fund the purchase, but the TSX is closed on Monday. I’ll make the trade on Tuesday, then the US market will close on Wednesday.

GDP over the most recently reported twelve months (April 2011 to April 2012) was 2.0%, which was an improvement over the prior period. But as encouraging as that might be, it’s backward-looking, and the economic outlook is still bleak. In fact, the TSX appears to be estimating 12-month earnings growth of -2.00% (that’s negative). Not very encouraging.

Market Outlook July 2, 2012

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