The Rebalancing Trade – Where will investors be looking in the New Year

As 2016 has come to an end and investors have taken some gains from a strong year in Canadian and North American markets off of the table along with locking in some tax losses, cash will be looking for a home in 2017. But where will investors be looking? As tax losses crystallize and professional and retail investors/managers perform reviews on portfolios, outlooks, and strategies, a common theme emerges. That theme is rebalancing which put simply means that investors sell a bit of their winners from their portfolio and move that money to the losers. It is a pillar of portfolio management if there ever was one and follows the old adage of buy low, sell high. But what happens when almost every sector sees strong returns in a given year? Where does the money for rebalancing go? 

Materials and energy both have had a nice run-up between roughly 12% and 14% depending on which sectors one looks at. However, with the US dollar