So far, so good. The stock market continues to appreciate and is nearing its all-time high. Confidence appears to be fairly strong, although volatility appears to be increasing somewhat, which corresponds to nervousness. The momentum of the stock market relative to bonds bodes well, which indicates that stocks should continue to outperform over the near term.

Inflation has increased, although the measurement is backward-looking and is already two months old. With top-line inflation at 2%, it is nowhere near worrying, but rather reflects strength in the economy. Anecdotally, I’m hearing about a strong housing market (here in Calgary), which is also a symptom of a strong economy (combined with low interest rates).

Looking at the various markets that I compare to each other each week, Emerging Markets (XEM) continue to be in favour, alternating with Hong Kong stocks (EWH). If one were following this investment method, they would choose the index fund that better matches their currency needs: EWH in USD or XEM in CAD.

Personally, however, I continue to buy individual stocks that present even stronger momentum than these index funds. Right now, ERF.to is in favour and is serving me well.

Market Outlook June 9, 2014

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