December was a bit of a rough ride, as investors and traders likely cleaned up their investment accounts and realized capital losses and gains. Since the beginning of the year, however, volatility has plummeted and the stock market has risen, although slowly. Stocks, for the second week, have better momentum than bonds, and are increasing their lead. It looks like it might be a good time to begin overweighting stocks relative to bonds.
When considering various asset classes, Chinese stocks (FXI) continue to produce the best momentum. Hong Kong stocks (EWH) and European stocks (XIN) are both a close second. I will continue to own XIN, since it trades on the TSX. I’m sure glad to own FXI in my US$ account.
The TSX continues to appear over-valued by about 16%. That’s not really a good sign. The fair market value could lie anywhere between 8,400 and 14,000, but I would be watching for improved corporate earnings announcements before I felt confident investing more money at these levels.