Stock market outlook: Time to play defense

In a market leaning toward the overvalued side, investors must dig deeper to unearth buying opportunities.

Lauren Adams, CFA 9 April, 2014 | 6:00PM

Equity markets offered a bumpy ride during the first quarter of 2014. Canada did better than most thanks to a strong performance by natural resources, with the S&P/TSX Composite Index up 6.1% for the three-month period, but with the S&P 500 up just under 2% and several other indexes in Asia and Europe in negative territory, investors aren't much better off than when the year started.

Unrest has resurfaced in Turkey, and the crisis in Ukraine has brought uneasy relations between Russia and the Western allies to a head. Although both these markets are a drop in the global macroeconomic bucket, the turmoil has sparked wider concern regarding slowing growth throughout the emerging markets, which have proven to be a key source of growth for large multinationals.

In addition to macro instability, markets face other uncertainties. The U.S. Federal Reserve has been scaling back its asset purchase program, stemming the flow of free money that had previously lubricated markets. And we have yet to see the full fallout of how the severe weather's impact on the North American consumer will affect corporate earnings.

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Lauren Adams, CFA

Lauren Adams, CFA  Lauren Adams is the Director of Cross-Sector Equity Research at Morningstar.