The North American markets seem to have hit a bit of a wall as of late. For the longest time, the markets have climbed higher and higher, even in the face of some difficult economic news. Is this the beginning of a downward move that could eat away at the profits investors have enjoyed for the last eight months? Or, is this the pause that refreshes the market, allowing it to move higher?
I have received a few calls recently asking me if I have changed my view on the direction of the North American markets. My answer has been no. I still maintain that the underlying fundamental reasons why the stock markets have risen to the levels of today are still intact to take the markets to the next level. These reasons are a low interest rate environment, no tax increases and accommodative policy from the U.S. Federal Reserve .
Some of today's fears that are spooking individual investors are the exact same as they were a year ago, among them are a weak U.S. dollar, higher commodity prices and a European debt crisis -- it doesn't seem like much has seemed to change in the past 12 months. We even have a volcanic eruption in Iceland again, which is causing trouble for airlines and the travel industry. In my opinion, like last year, the North American markets will climb this wall of worry again and investors looking for growth in their portfolio will find it. My thoughts at the beginning of the year were that 2011 would be very similar to 2010, and so far that seems to be the case in many aspects.
If you are an investor looking for growth in your portfolio, I recommend continuing to buy the dips. When the market has those brief sell-offs, consider them as buying opportunities. Many analysts still believe that the second half of the year will be a good one and the market will have another strong rally towards year end. I agree with this theory. Thus, some of the sectors that make sense to me to invest in are still the sectors that outperform in an expanding global economy. Selective positions in the technology and agriculture sectors make sense based on recent pullbacks in their pricing. Some of the telecom names are paying what I would call great dividends and can provide capital gains as well. Lastly, I believe the financials sector here in Canada can be the backbone of any growth or growth and income portfolio.
Thus, as I have said many times, if you are an investor looking to grow your portfolio, with today’s interest rates still very low by historical standards, I believe you must be in the equity markets in some capacity. The fixed income (bond or GIC) options are still having a difficult time keeping up with the rising cost of living.
If you have any questions regarding the above article or are looking for an investment adviser to help you with your portfolio, please visit my website at www.investmentadvisorgta.com. I will be glad to speak with you!
Allan Small is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst. The views expressed are those of the author alone, and are not necessarily those of Dundee Securities or Metro Canada.