North American markets were closed on Friday, but they’re open today.

Inflation has jumped up from 1.1% to 1.5% (headline), but interest rates have dropped slightly. Inflation is backward-looking, whereas interest rates (and the stock market, to an even greater degree) are forward looking. Inflation is at a level much closer to the Bank of Canada’s target rate (2%), which may set at ease anyone who was worried about deflation. It also reflects positive economic activity. However, interest rates will rise much higher before I’ll agree that the economy is very strong.

Stocks present far better momentum than bonds. Even though the stock market has been relatively flat over the past two months, it’s up 5.26% over the last 50 days, compared to bonds, which are 0.07% lower than 50 days ago. A balanced portfolio is most likely to benefit from being overweight stocks at this point. A word of caution: it will require patience to benefit from being long equities in a volatile market.

Comparing the various asset classes, Brazil (EWZ) and emerging markets (XEM) continue to enjoy the greatest momentum. Canadian stocks, although not in the lead, still appear attractive and outshine American stocks for the present. I’m experiencing the same thing in my personal portfolios.

Market Outlook April 21, 2014

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