Market Outlook October 10, 2011

What a week. Again. Monday was negative, Tuesday was awful, but recovered, Wednesday and Thursday were positive, and by the end of Friday, markets closed about where they opened on Monday (0.31% lower). My fair value estimate for the market has risen slightly, meaning that the market continues to appear undervalued.

Stocks don’t look like the place to have your money right now, though. Between stocks and bonds, bonds appear more attractive. Bonds have produced a positive return over the past few months, whereas stocks have lost value over the same period. And although 2.5% isn’t an impressive returns, it’s far preferable to -13%. However, gold (IGT) has done even better, and that’s what I will continue to own this week. The momentum of gold is positive, but not by much. Stocks, on the other hand, will have to have a couple positive weeks before their momentum turns positive.

Looking at inflation and interest rates, the economy doesn’t seem to be struggling as badly as the news tells us the economies of other nations are. I don’t know if the worries about economies in the United States and Europe are overblown, or if Canada is simply better off. Either way, I feel pretty lucky. Hopefully we won’t suffer as a side effect of troubles elsewhere.