We’ve been saying for months to avoid real estate, financial, insurance, banking, and brokers. This past week, all of these sectors were taken behind the woodshed and slapped silly again.
See, when you add up all of these sectors, we’re talking about a group that represents almost 1/3 of the S&P 500. So, of course the market will get smacked.
There have been several attempts in the media to compare what’s happening now with this group to what happened to the same group in 1998 — during the “Asian flu” and the Long-Term Capital hedge fund implosion.
Look, I don’t think we’re going back far enough.
Think back to 1990. Iraq had just invaded Kuwait, the US economy was slipping into a recession, several large leveraged buyouts had melted, and the real estate market was cooling off after a really fabulous run through the mid-to late 1980s.
Citibank soon dropped below $10/share.
There were also many several well-known banks throughout New York and New Jersey (and up and down the East Coast) that were trading for $2/share. Or less.
Has everyone forgotten that?
Many of the stocks in these sectors have broken support and are essentially in free fall. It does NOT mean the carnage is guaranteed to continue, but the likelihood is this may not end tomorrow, either. American Express is just the latest chart in the group to flash the “I’m melting” pose.
Now don’t get bummed out. There are STILL several great places to have your money invested. And we remain invested in stocks with the best relative strength. I know that I sound like a broken record when it comes to relative strength, but it’s VERY important.
So even though — in the short term — we may see some stocks (and some sectors) slip — just know that longer term, we’re in the right places, like stocks on relative strength buy signals. Stocks and mutual funds with the best relative strength are the names that come back the fastest.
If you have any questions, doubts, or concerns, you need to call the office *right now* to book a time to talk with Tom. We are standing by ready to help, at (732) 223-9000.
So, let’s talk soon, ok?