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Archive for August, 2011

Market Stats

Monday, August 8th, 2011

The chart below highlights just how fast, furious and widespread the decline has been over the last couple of weeks.  Among other ugly stats, you will notice that Small cap companies as well as the Telecom, Materials, Industrials and Financials sectors all sold off near 20% from recent highs. The declines in Brazil, Australia, Italy, France and Germany were even steeper. 

The broad based selling, resulting (in large part) from the S&P downgrading US debt, caused trillions of dollars in lost market capitalization for US Equities. Where did the money go?  Ironically, most of it went into the “safe haven” of US government debt pushing treasury prices higher and yields lower.

All of the market gains that took place during the period that the Fed was conducting “QE2” have been wiped out and the yields on stocks compared to bonds hasn’t been this high since 1962. No investor, institutional or otherwise, knows what is going to happen next but seasoned investors don’t sit idle in volatile markets.  Whether it’s selling names that have broken down technically or buying oversold opportunities, the key is paying attention and being active. 

c/o Bespoke Investments

We encourage you to revisit Dow 12,000, Now What?, which we wrote in January when we posited that the “big Bounce” from market lows was over and offered strategies to help protect and grow portfolios in volatile markets.  We do feel strongly that there are opportunities to exploit at current levels but would like to see the S&P stabilize before we make any more purchases.

In the coming weeks we will try to identify companies who have been unduly punished as a result of the broad sell off…companies down 20% or more that  likely won’t be selling 20% fewer burgers, servers, coffee, mobile phones or services (as a result of  an S&P downgrade, or European debt crisis)  than they were poised to sell three weeks ago when the markets turned.