The recent rally in Canada's benchmark stock market index, which has risen by 24% over the past 12 months, took it to a new record high last week. What's more impressive from our vantage point is the fact that Canada's equity market performance has outdone other markets, in countries where economic growth prospects are much brighter. But with stock valuations now close to historical norms, the case for similar equity price gains going forward have diminished. Moreover, we suspect that some of the recent gains in the energy sector are overdone.
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