The market felt choppy last week. Companies that are reporting their earnings seem to be, by and large, announcing good news. Whereas I would normally expect this to translate to higher share prices, it’s possible that some investors have taken this chance to liquidate positions that they are no longer comfortable with.

The Canadian stock market advanced, the US market also went up, especially small caps (IWM) and last week’s winner (FXI) dropped. The biggest surprise was the jump in the price of gold (IGT), which now has the highest momentum of the asset classes. IWM isn’t far behind. It still doesn’t outpace MG, though.

Interest rates have risen somewhat. I wonder if that fact has put the fear of inflation into certain investors, pushing them to buy gold. StatsCan reported inflation increased slightly from 1.2% to 1.3%, but that’s looking backward. Looking ahead, inflation expectations (as implied by real return bond prices) have fallen slightly to 1.89%. It’s far from looking dire yet.

Market Outlook August 26, 2013

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