Inflation jumped higher last week. Actually, it was last month that the increase took place, since the measurement is not only backward-looking, but it is delayed. Inflation for October (year-over-year) was 2.4%, an increase from 2.0% in September. That’s not too much higher than the Bank of Canada target, so it probably won’t result in policy or quantitative tightening. But it does indicate that the economy has been heating up, which is a nice change. Besides August, the last time the reading from interest rates and inflation was this robust was in June 2012. It’s nice to think that this might indicate the return of economic strength.

Stocks were positive for the fifth week in a row, rising 6.97% over that time. Just to clarify, I’m referring to Canadian large-cap stocks, using XIU as a proxy. That doesn’t quite make up for the correction, as they’re still down 2.17% below the level in mid-September. Small caps are faring worse, but I still believe that stocks present a better outlook than bonds. Between the various asset classes, US large-caps (SPY) still have the advantage.

I sold my momentum stocks to buy a stock that I know and have a long history with, that’s been beat up. I’m betting that it will recover, and will pay me a nice dividend in the meantime. For the moment, however, it feels a little like catching a falling knife, something that I’ve experienced more often than I’d like to admit.

Market Outlook November 24, 2014

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