July 10, 2010 Outlook

Last week, stocks reached their lowest point for the year. At the time, it was impossible to tell if this was the start of a new trend, or a great buying opportunity. Market movement during the rest of the week seems to have answered that question. The TSX gained over 3% during the week, implying that prices had fallen unreasonably low.

Neither stocks nor bonds show good momentum over the medium term, although stocks look much less worrisome than they did at the beginning of last week. The summer months usually experience reduced trading and quieter market conditions compared to the rest of the year. Caution may still be wise, as prices will probably continue to be volatile and bargains may still present themselves in the weeks ahead.

Short term rates have moved up from 1.39% to 1.49% as the stock market has rebounded. These are symptoms of reduced worries and improving stability. The likelihood of a recession still appears low.

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