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Canadian stocks have been enjoying a good run in 2014, but are the good days numbered?

In the first four months of the year, the benchmark S&P/TSX composite index has risen more than 8 per cent, easily outperforming the likes of the S&P 500, Japan's Nikkei 225 and the U.K.'s FTSE 100.

All 10 subindexes have contributed to the gains, with standouts from energy, health-care, materials, consumer staples and technology. Just as impressive, big moves from individual stocks come from a variety of sectors: Encana Corp. has risen 32 per cent, Magna International Inc. and Jean Coutu Group (PJC) Inc. have risen 26 per cent each, Saputo Inc. has risen 22 per cent and Goldcorp Inc. has risen nearly 20 per cent.

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David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, pointed out in a note on Thursday that the Canadian market has a couple of things going for it. For one, earnings are growing at a 5 per cent pace, versus just 1 per cent in the United States, as companies roll out their first quarter results.

For another, investors aren't yet being forced to pay a steep price for this superior growth. By his estimates, Canadian stocks have a price-to-earnings growth ratio (or PEG ratio) of less than one, "which means investors are getting paid rather than having to overpay for future prospective earnings growth."

But the TSX rally has its doubters. Brian Belski, chief investment strategist at BMO Nesbitt Burns, expects the benchmark index will finish the year at 13,575, implying a decline of 8 per cent from its level on Friday afternoon, when it rose 88 points to 14,752 – its highest level in nearly six years.

"Canadian investors have become increasingly optimistic as Canada has outperformed most other developed markets since the beginning of the year," he said in a note. "However, we believe this outperformance will be temporary, as the rally in Materials and now Energy stocks has not been supported by similar improvements in fundamentals."

He argues that the rally has been driven by money flows, as investors rebalance their portfolios, shifting money from winning strategies to those that have been underperforming in recent years.

While the S&P/TSX is leading most of the world this year, it has underperformed the S&P 500 in each of the past three years. The S&P 500 is 20 per cent above its pre-financial crisis high, but the TSX is still 2 per cent below it. Despite this year's gains, Canadian energy stocks are more than 20 per cent below their 2008 levels and materials are down 45 per cent since 2011.

But Mr. Belski added that his index target and the implied decline from its current level is hardly a reason run from Canada. "To be clear we continue to believe, like the U.S., Canada is in a broad secular bull market, but caution is warranted for the remaineder of the year," he said.

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Instead, he suggests emphasizing financials (fears of a housing bubble are overblown) and industrials (they will benefit as manufacturing returns to North America), as well as stocks with strong dividend growth.

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