The TSX market average was basically flat (minutely positive) over the past week. Bond prices jumped up by almost 1%, however, somewhat reducing the advantage that stocks appear to enjoy. Bond yields fell, which resulted in the bond rally, but which bodes ill for anyone looking to invest in bonds. As such, a portfolio that is balanced between stocks and bonds should remain overweight stocks.

Among the asset classes in my model, Chinese stocks (FXI) continue to be well positioned for outperformance. They are essentially tied with American small-caps (IWM) and followed closely by Brazilian (EWZ), Hong Kong stocks (EWH) and European stocks (XIN). Basically, Canadian stocks are not the place to be right now and emerging markets are doing well. I expect the trend to continue over the next couple weeks. (I myself will continue to own MG, which has even better momentum and has served me well.)

September has not be a negative month for stocks, despite history showing that September and October are typically the worst months in the market. Who knows what October will bring, but the market does not appear to be overheated. And November often brings a “Santa rally”, which typically begins the most profitable half of the year for owners of stocks.

Market Outlook September 30, 2013

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