I was away on holidays the last two weeks, and boy did I miss out on a shift in the market. The momentum stocks that I own, VRX and DGC, both dropped in price by about 10%. Ouch. That’s one drawback to momentum investing. Next time, I should probably just sell the stocks before going away from internet access for that long.

Interest rates rose over the past couple of weeks, but the posted 5-year mortgage rate fell. That means bond prices fell, but house prices are likely rising. But because bond prices have been falling, stocks show much better momentum and appear more attractive.

Of the various asset classes that I compare, Brazil stocks (EWZ) have the best momentum this week (as they did last week, but I wasn’t here to notice). Gold stocks did really well for a couple weeks, but it was very short-lived. As you might guess, the emerging markets (XEM) in general are doing well; Canadian small caps (XCS) also have good momentum, but both are well behind Brazil.

Market Outlook April 7, 2014

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