North American stock markets have re-initiated their upward trend.

After taking a brief break the last two weeks of January, the market has come roaring back with positive results for February and into the first week of March. Why has the market rebounded again and where should investors be placing their money to capitalize on this growth?

The number one issue weighing down the stock market over the last year has been job loss. Many Canadians and Americans have lost their jobs over the last few years, creating an unemployment rate in Canada (at its recent peak) of about 8.5 per cent, and 10 per cent in the U.S. However, recently the tide seems to have changed. The most recent numbers have revealed that the Canadian unemployment rate has come down slightly -- there has actually been an increase in the number of new jobs versus the number of jobs being lost.

In the U.S., the results haven’t been quite as good. Their unemployment rate has dropped slightly, but still stands at 9.7 per cent. So while tt appears that the job loss has stopped, they have yet to see positive job growth. However, if you were to compare these numbers to one year ago, both the U.S. and Canada have come a long way. Imagine how the markets would react when we start to see significant job growth both here and in the U.S. The resulting market action would be significantly more positive than it is today.

China continues to play a huge part in the growth of the world economy. This is why many commodity investors back in January, when China announced lending restrictions on its banks, sold out of their investments. The fear was that if China is trying to slow their economy down, they will slow down the amount of commodities it is importing as well. On Friday, China confirmed they are taking measures to keep inflation in check, but they are still continuing to stimulate their economy to maintain a targeted eight per cent growth rate. Thus, China does not appear to be slowing down their growth targets anytime soon.

So with the job market improving and China still growing at a rapid pace, why wouldn’t investors be bullish today? I think investors should continue to look at the sectors that will outperform as the economy gets better. Commodities and oil tend to outperform in this type of environment. Financials and technology should also do well. Be selective in the investments you choose, as I believe not all investments in these sectors will go up equally.


If you have any questions regarding the above article or are looking for an Investment Advisor to help you with your portfolio, please send me an email at 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.

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