Market risks are on the rise, although the bull market in North American equities to last for the remainder of the year, according to Irwin Michael, portfolio manager at ABC Funds.

“The Canadian market surge over the past four weeks has been largely fuelled by rising commodity prices with the oil and gas and mining sectors showing remarkable strength,” Michael notes in his latest monthly market commentary.

“The spectacular price advance of many junior natural resource companies has not escaped both institutional and retail investors. In fact, it is spawning increased speculation in junior resource financings whose volumes, by the way, have grown almost exponentially,” he observes.

”Fortunately, most of these securities and financings have gone to significant price premiums, however, we detect that a growing number of investors may be lowering their guard as they are smitten by emotions and extraordinary returns,” Michael warns. “We are reminded that their superb price performance is largely due to the spectacular rise in commodity prices.”

“The fact is, that “trees do not grow to the sky” and that investors, at some point, will have to liquidate speculative positions to lock in profits,” he suggests. “It is our intention to closely monitor our holdings and will periodically take profits in over-valued equities.”

Despite these concerns, Michael adds, “We remain generally optimistic with regard to the North American economy and equity markets. We do, however, recognize a number of growing economic and investment risks such as a relatively strong Canadian dollar negatively impacting Canadian domestic manufacturing and exports, the installation of new Fed Chairman Ben Bernanke and his
uncertain monetary direction and the recent 15th consecutive U.S. central bank short-term interest rate increase since 2004.”

“Mind you, in spite of all those perceived negatives the markets continue to climb the proverbial ‘wall of worry’ and appear poised to penetrate previous price highs,” he concludes. “In summary, we anticipate the continuation of this long-in-the-tooth bull market to at least the end of 2006.”