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Zachary Curry

Zachary Curry is chief operating officer and portfolio manager at Davis Rea. His focus is North American large caps.

Top Picks:

Stanley Black & Decker (SWK-NYSE)

Stanley Black & Decker provides diversified exposure to the U.S. home building and renovation markets. The company will also benefit from additional consumer spending from lower oil and gasoline prices. The shares currently yield 2.3 per cent and the dividend has grown annually for the last 5 years plus. The shares trade at a discount to the overall market multiple, and we expect income growth of just over 10 per cent for 2015.

India Fund (IFN-NYSE)

The IMF forecasts India's GDP to grow by 6.4 per cent in 2015. Middle class population growth is forecast to grow at more than 15 per cent per year over the next 2 years. The new government (May, 2014) is very pro-business, and infrastructure-focused. They are also committed to fiscal deficit targets. The new governor of the Reserve Bank of India cut its repo rate to 7.75 per cent as inflation remains below the central bank's target. The market has priced in some of these positive expectations, but longer-term we expect India's growth to remain above global growth forecasts.

BCE Inc. (BCE-TSX)

We believe expectations of a fourth national wireless competitor are too high. A continued shift to mobile will provide growth in wireless, and the Astral media acquisition adds further content to BCE's line-up. A current yield of 4.4 per cent provides income to shareholders and the dividend has grown consistently over the years.

Past Picks: November 19, 2013

Tourmaline Oil (TOU-TSX)

Then: $40.55; Now: $38.24 -5.70%; Total return: -5.70%

Stryker (SYK-NYSE)

Then: $74.10; Now: $92.45 +24.76%; Total return: +27.13%

Stanley Black & Decker (SWK-NYSE)

Then: $81.79; Now: $91.83 +12.28%; Total return: +15.60%

Total return average: +12.34%

Market outlook:

The global economy is likely to expand at a modest pace in 2015 despite some slowing in later 2014. As a basket, emerging market economies will continue slowing and are at risk of a crisis later in the year, with some exceptions. The U.S. economy is expected to remain robust. Inflation is expected to remain very low and global short-term interest rates are likely to remain low for the coming year at least. The U.S. Federal Reserve is likely to raise the Fed funds rate for the first time since 2006, ending an almost 7-year period of near-zero short-term interest rates. Government bond yields in Canada and the U.S. have declined to recessionary levels as global deflation forces become more entrenched. However, recession appears unlikely and yields should rise somewhat in 2015. As a result, investors are very likely to continue reaching for yield in corporate bonds and equities. The sell-off in corporate and high yield bonds in 2014 has created some attractive opportunities.

Despite the softness in equities last year, valuations remain rich in North America, and bargains are scarce. The only discounts for investors are in the commodity areas and some rebound is likely this year as long as emerging markets avoid a crisis. The upward turn in the U.S. dollar is a major development. When this has happened in the past it has led to emerging market crises. We are very worried about a replay later this year or in 2016. We are more worried now than we were three months ago that North American equity markets are approaching a major cyclical top after an almost 6-year rally that began in March, 2009.