The TSX is officially trading in record territory, with energy, materials and financials leading the pack.

Gordon Pape wrote on Monday in his article entitled “What bear market?” (GlobeinvestorGOLD May 12, 2008): “So it's time to break out the bubbly. A new record high is always worth a toast but when it happens while most of the world is battling market downturns, it represents a remarkable accomplishment.”

As the market ventures into new waters we can expect some volatility as profit taking occurs and the market settles into its new trading “zone”.

I can’t help but think about the prediction made by Ron Meisels back in March. (see my blog: April 3, 2008) As per his expectation, the markets are well on its way to recovery. Growth numbers came in proving that the U.S did not enter into a recession last quarter, and signs are indicating that the credit issues may soon come to pass. Additionally, CIBC World Markets Inc. economist Jeff Rubin now “warns” that crude oil prices are set to double again to $200 (U.S.) a barrel by 2012, driving Canadian pump prices to $2.25 (Canadian) a litre.

A very interesting article in the Globe and Mail yesterday caught my attention (“Food prices poised to drop sharply: Yardeni” – by Boyd Erman). I quote directly from the article:

Market strategist Ed Yardeni, who made a name for himself with accurate calls on the U.S. stock market's bull runs of recent decades, says that soaring food prices won't last because farmers are rushing to plant more crops and agricultural productivity is increasing with new investment.

His take on where to put your money?

For that reason, Mr. Yardeni recommended investing in a trinity of sectors: materials, energy and industrials.

Notwithstanding his outlook for food prices, his recommendations still include fertilizer stocks after their big run because of the role that fertilizer will play in increasing crop yields and dropping prices.

So what are some actions that can be suggested?

That depends. Those who were very uncomfortable with the extreme volatility experienced in January and February of this year may want to maintain a relatively conservative position. Those who profess a growth or aggressive investment profile and who were unfazed by recent negative activity may wish to consider increasing their holdings in the areas of energy, materials and industrials.

For my clients, I am specifically referring to the Mackenzie Canadian Resource and CI Harbour funds; two funds that fit the mould and have done very well this year. Please contact me directly to discuss further details.

As for all other readers, before making any investment decision I always recommend that you speak with a financial advisor who can make a detailed assessment of your financial situation.