Investing: The bear market is over, rebalance your portfolio.
Energy: Another speculation bubble will deflate end of summer.
Trade: A U.S./Canada trade war? It could be happening.

Investing
The bear market in stocks is over … indexes are unlikely to revisit the lows of March.
But little gain, now to year-end, is likely. With the S&P 500, for example, up 40% from its low earlier this year, the big rebound is past and a correction of 10% or so wouldn’t be unexpected. With both oil prices and bond yields soaring, the risks outweigh the benefits in the short term.
For 2009 … major indexes up 5% to 8%, including dividends. Modest economic recovery next year, with GDP up 2% ... our current judgment … spells similar stock market gains in 2010 as well.

Over the longer term, it’s a better story.
After the scalding of the past decade …
A return to the norm over the next decade: A 10-year annual average in the neighborhood of 10%.

Make sure you rebalance your portfolio. Don’t let scars of recent months dictate your allocation.
Stocks should continue to play a key role.
Look for sector titans with solid financials: Retailers Staples and Best Buy. Conglomerate ITT. Payroll services firm Automatic Data Processing. Also, equipment makers Graco and Emerson Electric. Consulting firm Accenture. In tech stocks, Google and CA. In financial services, still battered despite recent gains, consider JPMorgan Chase and Wells Fargo. Also PNC Financial Services and First Niagara Financial Group.
Or go the mutual fund route. For large caps, consider Fidelity Contrafund
and Vanguard Primecap Core Fund. For small caps … Baron Small Cap and FBR Focus.
Tap fast growing foreign economies with a 20%-40% share of your stocks. Again, mutual funds will help you spread the risk. T. Rowe Price Emerging Markets, Dodge & Cox International, and Matthews Asian Growth & Income are worth a look.

An appealing commodities option: Pimco CommodityRealReturn Strategy D. Or stocks or funds that capitalize on commodities’ movements: Vanguard Energy and T. Rowe Price New Era funds, for example. Or Marathon Oil and ConocoPhillips.
Real estate investment trusts, still at low prices, help hedge against inflation. Invest in REITs that are stashing away money to buy up properties at fire-sale prices.
As for bonds, look at municipals, which are currently yielding above 4%. Consider the Fidelity Intermediate Municipal Income Fund, since bond picking is hard.
Some investment grade corporates yield a juicy 7%, but defaults are rising. One good idea: The iShares iBoxx $ Investment Grade Corporate Bond Fund.
And high yielding junk bonds are alluring, especially when bundled … in the T. Rowe Price High-Yield Fund, for example … to offset increasing default risks.
Treasuries are still unattractive, and they will continue to be under stress until policymakers convince investors they’re serious about taming soaring deficits.

Energy
Brace for a surge in oil prices to about $85 a barrel within a few weeks.
What’s driving the run-up? Mostly speculation. Investors with lots of cash on hand look around and see a wide array of reasons to make a bet now on crude oil. For one thing, signs of a recovery in the U.S. make them think demand will pick up. Plus the major oil producers have been throttling back on exports and the dollar is falling rapidly, making oil, which is traded in dollars, a hedge against inflation.
Oil’s price spike will run out of steam over the summer, however, as financially pinched consumers blanch at paying $3 for a gallon of gasoline.
By year-end, oil will be closer to $65 a barrel, with gas near $2.25 a gallon.

Trade
Fears of a U.S.-Canadian trade war may be grossly understated.
Blame it on “Buy American” provisions that Congress wants on everything from energy to school construction. The Buy American language in the stimulus was meant to exclude NAFTA partners, but many states are still rejecting bids from companies that use Canadian or Mexican components in their products.
Canada’s local governments are threatening to retaliate. Their association passed a resolution requiring municipalities to stop buying from the U.S. if the Obama Administration doesn’t find a way to fix the problem within 120 days.
Obama is feverishly seeking a solution before tensions rise any higher.
The risk for U.S. firms is great. Water and wastewater equipment makers, which accounted for $10 billion in cross-border trade last year, are dependent on Canadian components. Other industries with North American supply chains will get dragged down, too, if they’re unable to buy from Canada and Mexico.

Another trade test looming for Obama: Imported tires from China.
The United Steelworkers union wants to slash imports from 46 million last year to the 2005 level of 21 million, with annual increases of 5% through 2012. The union blames imports for a string of plant closures that eliminated 7,000 jobs.
Odds are, come Sept., Obama will agree rather than buck organized labor. Bush blocked similar requests in the interest of free trade and ties with China.
The move will set a major precedent. Other industries will seek protection for iron and steel products, textiles and apparel, furniture, and consumer goods. The more Obama says yes, the greater the likelihood that China will retaliate.
In the nearer term, car manufacturers will have to shell out more for tires. The weak economy may force them to eat the expense ... the last thing they need.