Norman Levine, managing director, Portfolio Management Corp.
FOCUS: North American Large Caps
Market outlook:
We are currently at a time when it is difficult to commit additional money to either the stock or bond markets. In Canada, the market is dominated by resource, materials, and financials. Of those three, the only area where we would commit new money would be the financials, and even there we would be extremely selective. While many investors are tempted to buy oil and mining shares because they are down quite a bit, we think it is far too early and we think those investors will be badly burned if they step in now. There will be a time to buy, it’s just not now. Be wary of brokers peddling new issues in the oil and gas area. Lots of companies are issuing additional shares in order to shore up their balance sheets before prices fall any further. Just because they are selling doesn’t mean you have to buy. As for the U.S. market, near-free money has caused most stocks to become quite overvalued. Regional banks are one of the only areas where we would be committing new money. European stocks are much more attractive but the falling Euro will somewhat limit returns, although the falling Canadian dollar helps to mitigate those currency losses. As far as the bond market goes, we continue to have a historically low commitment to bonds as the interest rates received are extremely paltry. We do have a component, though, as bonds are generally a good foil to equities but we are loath to commit more to that area until interest rates become more attractive. Good quality non-resource dividend paying stocks, especially those with a history of regularly raising their dividends, are a much more attractive alternative at this time.
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