The yield curve has become steeper. Short-term rates fell at the same time as long-term rates rose. The change was small, but this creates a better environment for financial institutions, or anyone who borrows short and lends long. Within the historical perspective, interest rates are still very low. With low interest rates and a supportive yield curve, it looks unlikely that we’ll encounter the recession portion of the business cycle in the near future.
Stocks had a really profitable week. Somewhat surprisingly, bonds and gold also rose during the past week. But stocks are handily outpacing bonds and cash, which translates into improved momentum. Stocks haven’t had momentum this positive since early April 2013, so this is a supportive indicator.
Across the various asset classes, US small cap stocks (IWM) have the best momentum. In close second place are US large cap stocks (SPY) and European stocks (XIN) for those investing in Canadian dollars. Those ETFs present good opportunity, but it may be more profitable to look at individual stocks. I continue to own Magna, which is easily outpacing the ETFs. In the US, Google (GOOG) has better momentum than IWM (but Apple doesn’t) and in Canada, EMP.A and CTC.A look attractive (as two of the very few companies I looked at).