The time seems to fly by. Watching the market, week by week, is almost like watching the dotted line out the window while speeding down the highway in a car. The lines flash rhythmically, and it becomes difficult to tell if you’re moving quickly or standing still. It all looks the same, after a while.

This past week, the stock market rose nicely, and bonds fell. Momentum is approaching an equilibrium between the two asset classes. It’s the time of year when investors sell for tax losses, and it’s starting to look like there’s a good chance of the market firming up in the new year and favouring stocks again. Having said that, it’s too early to tell for sure. The stock market still appears overvalued, and it will be helpful to see results from the next quarter before ascertaining the outlook for the market in general.

Asset rotation continues to favour Chinese stocks (FXI). Hong Kong stocks and, in CDN$, emerging markets (XEM) are also in favour at the moment. It appears that economic data out of China is positive and the Chinese currency (renminbi) is strong. I’m sure glad I owned FXI over the past week.

Market Outlook December 17, 2012

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