Last week, stocks underwent another correction of -1.6%. At least a minor correction seems typical for this time of year. Over the past two weeks, the stock market has given up 4% of its value. Compared to the 14.5% it had grown since Jan 2014 (until two weeks ago), that doesn’t seem so bad. While stocks fell over the past week, bonds rose, as would be expected. Even so, stocks continue to have a momentum advantage over bonds, albeit a shrinking one. To be blunt, the next four weeks probably won’t be much fun for investors who own stocks.

The outlook for stocks is not rosy. Hong Kong stocks (EWH) have negative momentum, Brazil stocks (EWZ) have massively negative momentum, Chinese stocks (FXI) have barely positive momentum, gold (IGT) has negative momentum, US small caps (IWM) have negative momentum, US large caps (SPY) have a little positive momentum, bonds (XBB) have a little negative momentum, Canadian small caps (XCS) have very negative momentum, Canadian large caps (XIU) have a little negative momentum, emerging market stocks (XEM) have slightly negative momentum, real estate (XRE) has negative momentum and, the big winner, European stocks (XIN) has somewhat positive momentum. In a nutshell: there’s nowhere to hide at the moment. As a comparison to stocks, bonds grew in value by just 3.23% from Jan 2014 until two weeks ago.

A few individual stocks show promise. Right now, CP Rail (CP) is working for me. It’s gained 8% over the six weeks that I’ve owned it, and it appears poised to continue. In the US, Gilead Sciences (GILD) has served me well for the past ten weeks and is really the only US large cap stock (from the S&P 100) that looks promising.

 

Market Outlook September 29, 2014

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