A macro market like this is characterized by higher performance correlations across sectors and stocks. However, this makes it more difficult to differentiate between a good and bad investment.
“The return of the stock picker’s market is likely to occur around the same time that the economy shows signs of stabilizing,” said Myles Zyblock, chief institutional strategist at RBC Capital Markets.
He pointed to the uptick in December’s Leading Economic Indicators as a hint of good news for trading-oriented investors and possibly a very early fundamental confirmation of a bottoming process. However, this data point alone is not sufficient to convince the strategist to alter his current position.
Mr. Zyblock did suggest that those who place more emphasis on timeliness, or those with a tolerance for more risk, should keep a close eye of homebuilding stocks. He told clients that the June 2008 relative price low for these equities – assuming it holds – is consistent with an upturn in the broader equity market by April and in the economy by the fourth quarter of 2009.
Meanwhile, Mr. Zyblock’s favourite commodity is gold, which he prefers over energy and industrial metals despite very soft global growth for bullion. The supply and demand environment for paper currency versus gold also suggests gold prices should be higher, he argued.