Market Outlook June 20, 2011

The stock market is not showing much strength. It has negative momentum and the popular consensus seems to be that things will get worse. Of course, that doesn’t mean they will, but the outlook appears to be rather pessimistic. And it doesn’t help that we’re approaching the end of a quarter (window dressing) and the summer months, when investors will rather sit in cash than leave their holdings unattended during a vacation.

For the second week in a row, bonds have more momentum than stocks in Canada. Last week, they were pretty close to even. This week, the balance has really moved in favour of stocks. If I had a portfolio invested between stocks, bonds and cash, I would move out of stocks and into bonds at this time. The stock market is obviously weak, but it could also be the bottom; there’s no way to tell. The optimistic message I heard today is that company earnings are up 18%, but the market is still down.

But in my asset rotation portfolio, I continue to hold IGT (gold). Gold continues to present the best momentum between the assets that I track. It has only had a moderately positive week, but that’s far better than the stock market did.