Market Outlook September 19, 2011

Stocks aren’t doing well. They don’t seem to be going up. But for those who prefer optimism, stocks are no longer falling lower. In fact, real estate stocks seem to have sparked some keen interest on Friday. Only time will tell if this is a turning point, but it’s too early to say that it’s time to buy in to the stock market. Strangely, both stocks and bonds are down for the week, but bonds still have the greater momentum. I continue to own gold (IGT) for the coming week, but momentum has dropped and real estate has almost caught up. I won’t place a trade this week, but it looks increasingly like I will next week.

Compared to early July, the risk of a bear market seems less likely. Interest rates continue to be low, with little chance of rising in the near future. Inflation remains contained and the term spread is sloping in the right direction. That isn’t to say that Canada couldn’t be derailed by the economic ills of its trading partners. The stock market continues to appear right in the range of fair value, although it is slightly lower (undervalued) compared to last week. For anyone with a long time horizon and a strong gut, this is a good price at which to buy. It’s just that prices could go down (or up, then down) before moving higher.