don't get burned ? Michael Bowman, Executive VP & Portfolio Manager, Wickham Investment Counsel
FOCUS: North American Large Caps & ETFs
Market Outlook:
I have grown very cautious on the stock markets and for those who have watched my BNN appearances; I don’t ever recall saying that. Even though the bull continues to run, U.S. jobs growth missed expectations, retail sales and industrial production are weak, the U.S. housing recovery has been tripped up, and monetary stimulus is dying. There seems to be a disconnect between the equity markets and what is happening in the economy. In looking at market fundamentals, by many measures, stocks are more overvalued than at the 2007 high, and don’t blame it on the weather. In Canada, it seems that global demand for our goods and services is sharply declining. The rally in Canadian equities is not unexpected considering they have been in the doldrums for a couple of years, but I don’t see it as a future forecaster. In Europe, the recovery is quite lumpy and the unemployment rate may be in double digits for quite awhile. I am not finding the risk-verses-reward appealing right now as the market is rich and trading at above average valuations. After 20 percent gains the past two years, the third year typically is low single digits. While I have every reason to be a market participant, stock and ETF selection will be the key going forward. Stocks and bonds will not be providing that free ride we have been on for the last five years.
We need to remember that long term success can be destroyed by a short term failure