FOCUS: North American Large Caps

Market Outlook:

Heading into the third month of the 2016, I think that some trends are becoming clearer. The focal point of 2016 was supposed to be the strengthening economic recovery in the US – thereby leading the global economy – but nothing of the sort now seems to be the case, and, if anything, the global economies appear to be weakening. As this does not suit the official forecasts made at the beginning of the year, a certain amount of fact twisting has been in order, but that does not necessarily improve the actual outlook. Several members of the Federal Reserve Board in the US are concerned about the downside risks attending the outlook for inflation, ‘rising inflation’ being a sort of backhanded measure of ‘global strength’. Various price indices are showing that inflation rates in the US are nowhere close to the Fed’s 2% target (which would have justified triggering further rate increases). Instead, its preferred measure dropped 0.1% in December from November and rose just 0.6% from a year earlier.

The market is not cheap, especially if the recent weak earnings trends persist, and therefore valuations remain at risk. Many of the favourites from 2015 have taken it on the chin thus far in 2016, and many of those stocks still have no underpinning of what I would refer to as “value”. I prefer to be patient and let values come to me rather than trying to force the issue and get mauled by the market. Despite its lousy yield, I like “cash” as an asset today.

TOP PICKS:

Amaya (AYA.TO) 

Fortis (FTS.TO) 

Alamos Gold (AGI.TO) 

Past Picks: Mar. 17, 2015

Bank of Montreal (BMO.TO)

Flextronics International (FLEX.O)

Alamos Gold (AGI.TO)

Total Return Average : -2.92%