Over the next three months we should see a rationalization of the front-running U.S. Federal Reserve with other central banks and the capital markets. At present the Fed wants to lean into the wind and raise rates, proclaiming particular positive data such as employment and nascent inflation, however, both data sets are considered lagging indicators, and not leading ones, predictive of green shoots. Global data is soft or softening. Expectations are that the ECB and China will continue to stimulate while many Fed bankers have been talking up a continuance of a rate hike. Yellen’s recent comments suggest, however, that she, and she alone, is in charge and is more dovish than those on the talking circuit. The volatility from central bank messages is in part, I believe, to keep investors confused, or is it that the unchartered territory the Fed finds itself in is simply catching up with it?

A convex portfolio is still preferred, though “risk assets” (energy, materials, financials) are currently rolling over from previous peaks initiated early March. Persistent weakness in data against an upside risk move also necessitates that we look at defensive weakness as an opportunity to add to current or new positions; in addition to any seasonal plays that may still work in what has become a distortion of seasonal the last six months and counting.

TOP PICKS:

Apache (APA.N)  

Apache is a lean and mean energy company. They recently pared back their portfolio bringing more surety to its production profile while reducing dependence on Egypt. There have been more than $11 billion in asset sales. While becoming leaner production, reserves, and cash flow will decline in the short term, but the company will be left with more capital to pursue opportunities. The stock is in a seasonally strong period with an upside target of $79.00 USD.

Health Care Select Sector SPDR ETF (XLV.N)

The healthcare and biotech sectors became a political football (Clinton) last summer near the end of their traditional strong seasonal period. This is a normal event within the political election cycle. With one of the few sectors raising estimates and one of the few in a secular bull market the space was bound to resume a bull trend. Having recently breached its 200dma from below brings in a target of $84.00 USD or 18.86 percent.

iShares S&P/TSX Global Gold Index ETF (XGD.TO)

Gold producers offer excellent risk-to-reward (as does bullion) in this first of two seasonally strong periods (April-May & August-October) based on two factors. One is on a producer basis with Q1/16 EBITDA to track levels last seen in 2014, with the outlook for subsequent quarters potentially higher as well. Declining cash costs could be translated in into FCF and growing cash balances. The other is bullion itself. With central banks confusing markets, the bid under bullion is real, though producers lead the commodity as a general rule. Target $23.50

Past Picks: Apr. 30, 2015

iShares Trust Barclays 20+ year Treasury Bond ETF (TLT.US)

Canadian Natural Resources (CNQ.TO)

Exelon (EXC.N)

Total Return Average : +2.89%