Canadian stocks are down about 3 per cent since the opening of trading on Jan. 2, and in the past 12 months the S&P/TSX index — the broadest measure of market activity — is up 6 per cent.

It’s been a different story in New York. As the U.S. economy has emerged from hibernation, the Dow Jones Industrials are on a tear. The main average is up 12 per cent since Jan. 2 and 20 per cent in the past year.

So, halfway through the year, investors have a clear picture of what’s happened and wonder what’s coming next.

The story is the tale of two different economies, says Geoff Stein, an asset allocation strategist based in Boston with mutual fund manager Fidelity Investments. Fidelity is one of the world’s biggest fund companies with 20 million customers and $1.7 trillion in assets under administration.

Stein was in Toronto recently and at a briefing said a broad-based U.S. recovery is gaining traction, while our economy is muddling along. The great resource and housing engines that have fuelled markets since 2009 are showing signs of age.

On the resource front, developed-world demand for raw materials remains weak. Demand has been good in China and emerging economies, but faltering growth means less demand ahead. China’s economy grew at its slowest pace in 13 years in 2012 and through May the trend continues. It reported last week that May exports to the U.S. and the European Union, its two top two markets, fell again.

“Commodity growth is pretty challenged,” Stein said.

For our banking sector , housing and mortgage demand is slowing, though in the GTA prices still defy gravity. New mortgage lending and insurance rules have reduced the home buying pool, low rates have pushed prices to record highs and high consumer debt means fewer buyers qualify for mortgages.

“We aren’t seeing a crash, but when we look at housing and stretched consumers, we don’t see a lot of new demand,” Stein says.

In the U.S. on the other hand, housing is in recovery and energy prices are falling aided by new technologies which are boosting reserves of oil and gas. Indirectly this gives consumers more money and keeps inflation low. U.S. consumer debt is also falling and job creation is rising.

So here’s what Stein sees:

Slow, unspectacular profit growth for Canadian companies. Since energy, resource and banking stocks combined make up 73 per cent of TSX listings, no huge gains for the TSX ahead; The U.S. dollar gaining because of a stronger economy. Stein sees our dollar bouncing between 90 cent and 97 cents U.S., mirroring other forecasts. For example, TD Bank economists said last month the dollar could hit 90 cents by next year. Good news for exporters, bad for tourists. Limited gains for bank stocks, which most of us hold in RRSPs and pensions. “The earnings outlook for them is pretty limited,” Stein says. “There’s no wind at their back.” Rates to stay low. “It’s going to take a long time to work our way out of the overleveraged situation we’re in.” He also believes we’re at the bottom of a long term cycle of low rates and the direction will be higher, though not imminently. Continued low inflation. “There’s not much new here,” Stein said. “There’s lots of money sloshing around, but I don’t see rates going up much.” This is also in line with other forecasts. In a recent economic briefing, the Royal Bank of Canada sees inflation at 2 per cent or less through 2015.

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When you put that altogether, the advantage goes to the U.S. with low inflation and a low rate environment favouring stocks as modest recovery takes hold.