Gavin Graham, chief strategy officer at INTEGRIS Pension Management

FOCUS: Global Equities & North American Large Caps

Market outlook:

With stock markets increasingly volatile and long term bond yields starting to rise in North America after the end of the U.S. Federal Reserve's quantitative easing programme, investors should be taking some profits after a six year bull market and positioning their portfolio in more defensive sectors.

Stock market indices are at record highs and valuations are near all-time expensive levels, whether measured by the Shiller cyclically adjusted P/E ratio or stock market capitalization as a percentage of GDP.

The halving of the oil price in the last six months and the weakness in commodity prices due to China's slowing GDP growth will affect earnings for much of the Canadian market, while the strength of the U.S. dollar will hit the 40 percent of S&P earnings that are derived from overseas sales. Increased political uncertainty in Europe and the Middle East also creates headwinds.

Sectors such as healthcare, consumer, utilities and pipelines are reasonably valued and provide income support. Investors should also maintain some exposure to gold mining stocks as an insurance against central banks, which now includes the European Central Bank, expanding liquidity very rapidly.

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