The next leg of the bull market is here, Paradigm says

Have you been in fixed income? It’s time to get out.

That’s the opinion of Paradigm Capital analyst Aazan Habib, who says the next leg of the equities bull market is ready to roll out.

In a research update to clients June 2, the analyst said asset allocation trends favour commodities and equities over fixed income.

“We continue to highlight the structural trend change in favour of commodities over bonds as a critical development that should have implications for portfolio construction over the next decade,” Habib said. “We expect commodities and commodity-linked assets to benefit from rotation out of fixed income as market participants adjust to an environment where bonds are no longer in a 40-year bull market. Our analysis suggests an asset allocation pecking order of equities, commodities and then fixed income.”

The analyst said the next phase of the bull market is now forming.

“The S&P printed a bullish monthly candle for May, which engulfed the April candle and tested new all-time highs,” he wrote. “Monthly momentum remains in a bullish configuration as does breadth, with 73% of constituents trading above their 200-day moving averages. In Canada, the TSX Composite is earlier in its breakout process than the US benchmarks but continues to exhibit a bullish long-term momentum/breadth profile. We continue to target upside toward the 24K and then 26K zones. A monthly close below 21K would be necessary to derail this view. Going down the cap scale in Canadian equities, we are seeing follow through from the bullish monthly momentum signals that triggered on the TSX Small Cap Index and Venture Composites earlier this quarter.”