MARKET ACTION IN JUNE & OUR CURRENT OUTLOOK…

The market has struggled to find concrete direction since last August. Rallies have been short lived and sell-offs (as the one in June) have been swift and severe. It appears to have a high probability of being the start of something much more significant on the downside. Of course, we don’t know this for certain, so a clear focus and actively managed game plan remains key.

It was interesting to see an article in Investor’s Business Daily that reported a large net outflow from mutual funds in May which represented a huge reversal from recent months. It’s just another highlight of a market that is quickly becoming weak.

As we entered the month-end the market digested a slew of mixed data on the U.S. economy. The most disconcerting news came from a report showing May new home sales fell 32.7%, the lowest level in 40 years. Single family unit sales fell to an annualized rate of 300,000 following the April expiry of a government tax credit incentive. Investors’ hope of a housing led economic recovery seemed to evaporate, which coincided with weaker existing home sales data earlier in the week.

Inconsistent economic data continues to plague markets that seem to be looking for a reason to sell rather than buy at the moment. Not surprisingly, the Federal Reserve held to its pledge of holding interest rates low and steady at last week’s rate setting meeting. The U.S. central banker offered a less upbeat outlook for the economy acknowledging the faltering pace of recovery and citing potential spillover effects from Europe’s debt problems. The past month saw Spain go through another downgrade, which not surprisingly negatively affected the markets.

As economic news flows remain weak, debt “problems” continue to spread throughout the European Union, uncertainty in China’s growth…..well, upside catalysts remain hard to find. With information flow utterly negative across the board there are some offsetting opinions. Some say global stocks will rally in the second half on growth prospects. This coincides with a recent report by the International Monetary Fund (IMF) who raised its forecast for global growth this year, reflecting a stronger-than-expected first half, while warning that financial-market turmoil has increased the risks to the recovery. The world economy will expand 4.6 percent in 2010, the biggest gain since 2007.Growth next year is projected to be 4.3 percent.

See the full PDF version of this month's commentary as well as the archive in our Market Info Section

• An in-depth look at the market action in June
• Our current outlook
• Performance of the Growth Strategy
• A technical look at the TSX & Dow Jones World Index
• An interesting article on top hedge fund managers