Financials and Energy/Materials/Industrials...From Mikey in today's Barron's..
<<The crucial question from a broader market perspective is whether the indexes can resume their uptrend without any or much help from financial stocks, in contravention of Wall Street's rule of thumb.
There's no denying that weak financial stocks are a net negative for the broader market. But it's also demonstrably the case that stocks climbed to new highs repeatedly this year with financials, especially banks, slouching lower nearly the whole time. Indeed, financials have not been a leadership group during most of this bull market. Mostly, this is a testament to the bull market in companies that produce dirty and heavy things, not those that perform financial alchemy.
John Roque, technical analyst at Natixis Bleichroeder, has long called for financials' share of the S&P 500 to decline and that of energy, materials and industrial stocks to gain. It's happened: financials' weighting has fallen from 22.3% in late '06 to 19% today. The average since 1990 has been 16%.
Energy, materials and industrials make up a collective 27% of the S&P 500, and the sectors through Thursday were up between 15% and 31% this year. This accentuates the fact that the Federal Reserve's half-point cut in interest rates last month was not properly seen as a signal to buy financials but a catalyst for the weak-dollar, global-growth reflation trade to resume -- the trade that has been floating most world markets for years..........
......About the best that can be said for now is it's time to be on the lookout for hints of capitulation among financial-stock investors. There's probably no hurry to bet on a turn just yet. But even if not, the market has at least a chance to stabilize without them.>>
E-mail: michael.santoli@barrons.com |
