Companies have started reporting their second quarter earnings. On average, it hasn’t been great so far, because the average P/E of the market has increase (due to lower earnings, since the price has increased). My fair market estimate is now slightly lower than the current market value, showing it to be fairly valued (to marginally over-valued). It makes sense, then, that bonds still look somewhat more attractive than stocks, although the comparison is very close to even.

Stocks had a positive week, rising almost 2%. That’s particularly encouraging, given that not all the earnings news was positive. Real estate no longer has the greatest momentum of the asset classes I track, having fallen slightly behind US stocks (SPY) and Chinese stocks (FXI). I will continue owning real estate over the coming week, since I prefer not to trade on the US exchange if I can help it.

I continue to look for income-producing stocks to add to my portfolio, particularly where the yield is greater than prevailing interest rates. This way, I can earn a return on my capital despite market volatility, but I still have the opportunity for capital gains, given the (historically) low level of the market.

Market Outlook August 13, 2012

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