The TSX is closed today for Victoria Day. But with uncooperative weather (in Calgary), I’m spending the day indoors. The stock market seemed to take a pause a couple weeks back, but the last four weeks have been positive. The past week saw interest rates rise and stocks pull further ahead of bonds. It’s clear that, for the present, the smart money is moving into stocks.

The big news last week was how very weak the inflation reading was. The economy has certainly not been surging and it looks as though spending has been slow. This makes it difficult for businesses to increase prices and pass along increased costs (if there are any), although the headlines blamed the low inflation on reduced gas prices. It’s Victoria Day, and just before the long weekend gas prices jumped to their “summer level.” I’m not calling the newspapers liars, I wouldn’t do that, but it seems ironic. I wonder who is experiencing lower gas prices?

As for my asset rotation model, European stocks continue to shine. I enjoy watching the price rise, and I’ll continue to own XIN over the coming week. Elsewhere, US stocks (especially IWM) surprised to the upside. That may be the next asset to own.

Market Outlook May 20, 2013

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