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This April 18, 2011 file photo shows traders as they work at their posts on the floor of the New York Stock Exchange.


Now might be a good time for investors to pause. It is a light week for macroeconomic data, and earnings season is drawing to a close, which suggests markets could be more stable over the next few days than what we have seen in the first half of May.

After a powerful run that began last August, stock markets have now entered a new phase, says Paul Vaillancourt, chief investment officer for Canadian Wealth Management, a Calgary-based boutique investment firm owned by Société Générale SA.

"When a market goes transitional like this, I'm in no rush to go and add to the big flagship names," he says. "We just think the markets are going to bounce around for the next couple of months. There's just no big reason to rush into the markets."

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Mr. Vaillancourt says stocks are fairly valued today and he anticipates that the markets will go sideways until the beginning of fall. He thinks that the S&P/TSX composite index will sit around 13,800 points, with an upper limit of 14,300. Financials look well-positioned, but energy and mining stocks look "a little overdone."

In New York, the S&P 500 is right in the middle of the fair value range, he adds.

"It's not just pure fundamentals driving the markets now. Sentiment has changed and become more negative," Mr. Vaillancourt says. However, he remains overweight in equities and says his approach in the coming months will be to stay the course and add selectively to certain positions, if the price is right.

He agrees with many other market strategists that the U.S. Federal Reserve will have to keep lending rates very low in an effort to hold back the value of the U.S. currency. But he's not expecting the loose money policy to give another lift to stock markets like the one they experienced last August. "We need time to let things run their course, to let things clear, such as the debt problems in Europe," he says.

Bullish investors have benefited from ignoring all the macroeconomic noise, Canadian Imperial Bank of Commerce economist Benjamin Tal said in an interesting report published Friday.

They have, instead, capitalized on the "decoupling of the U.S. economy and its stock market," a phenomenon that he says is likely to accelerate. That's because almost half of the revenue generated by companies on the S&P 500 now comes from offshore.

The same trend is occurring in Canada. Mr. Tal surveyed more than 100 companies on the TSX and found that the firms that derived more than half their revenue outside the country made up more than 35 per cent of the market value on the list. The kicker is that these new international businesses have significantly outperformed the more domestically oriented companies. It is a compelling argument that investors should focus more on the global picture.

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On Wednesday afternoon, however, investors will no doubt zero in on the minutes of the Federal Reserve's Open Market Committee meeting held last month, when the group voted unanimously to end the stimulative asset-buying program known as quantitative easing, or QE2.

The Fed's chairman, Ben Bernanke, already shed some light on the committee's thinking at a historic press conference following the meeting, but the market will still be looking for any hints as to what shape monetary policy could take following the conclusion of QE2 on June 30.

In Canada, eyes will turn to the latest consumer price inflation data on Friday. After a significant jump in March's CPI that surprised economists, April's rise is expected to be a much more modest 0.5 per cent, taking headline inflation to 3.3 per cent. While energy prices continued to rise last month, Michael Gregory, senior economist at BMO Nesbitt Burns, expects that clothing and food price increases reversed their previous month's spike.

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