Around The World in 100 Words - July 2016; Week 30

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Another day, another dollar, so the saying goes. And speaking of dollars, the U.S. Greenback is riding high, sending oil prices lower and with it our Loonie and our resource heavy stock market. Globally, equity markets in general have pulled back somewhat from their recent inter-year highs, a move that is entirely consistent with our view that stock markets are fully to over-valued, based on the outlook for corporate profits.

Two Big Numbers to note:

18.3 Price-to-earnings ratio of the S&P 500, which is near its highest multiple in more than a decade.

22.9 Price-to-earnings ratio of the S&P/TSX composite index. Also, approaching its highest multiple in more than decade.

So with stocks priced with everything and the kitchen sink factored in (which is literally the case with Lowe's, which currently trades at a 24.9 P/E multiple), what can investors expect for the balance of the year? Crystal Balls and Magic 8 Balls notwithstanding, anyone's guess is as good as the next. Markets do not behave rationally in the short term. Like teenagers, they are predictably unpredictable from one day to the next. But given enough time, the expectation of reasonableness increases.

So what would a reasonable outlook look like? In basic terms, it would mean markets trade in a narrow range for the balance of 2016, though more likely than not, with a slight negative list to them. Our diversified approach which prioritizes interest yields over capital gains, positions clients well to ride out sideways markets. Being modest in one's outlook for additional gains this year should also help. Year-to-date our portfolios have outperformed the MSCI World Equity Index, and done so with significantly less volatility. Finishing the year where we are, with perhaps a percentage point or two added on, would be an impressive result given all that this year has experienced. Stay invested and stay tuned.