The past week wasn’t particularly good for stocks. Equities fell by half a percent, while bond values rose by half a percent. As would be expected, bond yields fell somewhat. The surprise, for me, is that gold (IGT) continued to rise, and presents the best momentum among the various asset classes that I analyse. That is a fairly defensive signal and doesn’t bode particularly well for stocks. Interestingly, real estate has also risen, so it may be a case of inflation worries. Canadian and US small caps are not far behind and probably continue to present opportunity for those who own them.

Despite the short-term slow down in equities, they maintain a clear advantage over bonds. A balanced portfolio should continue to benefit from overweighting equities. And although gold has good momentum, VRX (which I will continue to own) and MG are individual stocks that have about double the momentum. Owning individual stocks has worked better for me, so far, than owning ETFs, in the small portion of my portfolio that I use the momentum strategy with (registered funds that don’t produce cash).

Market Outlook March 17, 2014

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