New Highs
So much for the sharp selloff and mini bear market during May-July. The market slowly but steadily based, came back and now the S&P 500 is trading at new 52 week and 5 year highs. Just 4 months ago the market was in the throes of concerns over earnings, interest rates, the dollar, geopolitical risks, commodities and housing crash. And just like that earnings are ok, rates are down sharply, the dollar is stable, geopolitical risks have softened (a little), commodities took a nosedive and housing has become less of an urgent issue. Nothing like a 75bps drop in 10 year Treasuries!
The relative weakness in small and mid caps and the relative strength in large caps and in particular utilities and reits suggest a flight to quality and a flight to interest sensitives. Why would this occur? The sharp drop in interest rates suggests a weakening economy. The relative weakness in small and mid caps, i.e., the average stock, would confirm the weakening economy idea. The relative strength in large caps, utilities, and reits could confirm this idea as well. Large caps are safer so they catch the majority of the equity money, utilities and reits are competitive to interest rates so they also get more funding.
Right now the market is saying there's an economic slowdown of some sort coming but it's going to be ok. The market is looking past the abyss. If news regarding the slowdown turns even a little uglier, then the market will take a turn for the worst. But, many stocks are telling us worrying is a waste and there are good opportunities ahead of us.
The capitalist system has its faults like anything else but there are the highlights, too. Capital gets reallocated quickly and success stories rise to the top. Despite many worries, the companies that are well positioned to capitalize or get past the current environment react favorably. The decline in the late spring/early summer cleared the decks of speculation and set the stage for the next round of winners. (That will lead to new speculation but more on that at another time.) Frankly, the new breed of winners are everywhere and a little digging and careful research will yield much fruit.
For more information please call directly or visit our website and www.gellercapital.com
The relative weakness in small and mid caps and the relative strength in large caps and in particular utilities and reits suggest a flight to quality and a flight to interest sensitives. Why would this occur? The sharp drop in interest rates suggests a weakening economy. The relative weakness in small and mid caps, i.e., the average stock, would confirm the weakening economy idea. The relative strength in large caps, utilities, and reits could confirm this idea as well. Large caps are safer so they catch the majority of the equity money, utilities and reits are competitive to interest rates so they also get more funding.
Right now the market is saying there's an economic slowdown of some sort coming but it's going to be ok. The market is looking past the abyss. If news regarding the slowdown turns even a little uglier, then the market will take a turn for the worst. But, many stocks are telling us worrying is a waste and there are good opportunities ahead of us.
The capitalist system has its faults like anything else but there are the highlights, too. Capital gets reallocated quickly and success stories rise to the top. Despite many worries, the companies that are well positioned to capitalize or get past the current environment react favorably. The decline in the late spring/early summer cleared the decks of speculation and set the stage for the next round of winners. (That will lead to new speculation but more on that at another time.) Frankly, the new breed of winners are everywhere and a little digging and careful research will yield much fruit.
For more information please call directly or visit our website and www.gellercapital.com
posted by David Geller at 11:39 AM
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