Colin Stewart, CEO and portfolio manager, JC Clark Limited

FOCUS: North American Large Caps and Long/Short Strategies

Market outlook:

We enter 2015 feeling cautiously optimistic. It is almost certain that after several years of benign volatility, market fluctuations and risk will rise. Nevertheless, we believe the outlook for equities generally remains favourable.

The U.S. economy continues to improve and is markedly stronger than most of its large global peers. Falling unemployment and weak oil prices will bolster an already strong U.S. consumer. Low interest rates, modest inventory levels, and household formation will continue to push U.S. housing starts higher, leading to a further “normalization” in the U.S. housing market.

While we enter 2015 with a positive bias, it would be naïve to ignore the multitude of risks on the horizon. Slow ing global economic conditions, weak commodity prices, and the beginning of a rate increase cycle by the Federal Reserve, are all risks that we will monitor closely and ones that will inevitably usher in a period of heightened volatility. In particular, we are focused on domestically driven U.S. companies and those Canadian businesses that export into the U.S. market, both of which will benefit from improving U.S. consumer spending.

Industries such as U.S. housing, lumber, and consumer discretionary all stand to gain. With limited opportunities for yield in the traditional fixed income markets, we believe investors will look for yield in businesses that are perceived as relatively stable and pay an attractive dividend yield.

Top picks:

Richards Packaging (RPI_u.TO)
Air Canada (AC.TO)
Toll Brothers (TOL.N)