It’s a Traders’ Market with Only a Few Stocks Doing Great


economic healthThe recent stock market rally looks to be running out of steam. Trading volume has been declining since May and this isn’t a good signal. We’ve had a great run since September and we’re due for a consolidation.

Investors pretty much are fully anticipating lackluster economic data well into 2011. The stock market is trading on foreign news now and, to a lesser extent, domestic monetary policy. The Federal Reserve is, however, running out of stimulative options and, while the stock market likes a more accommodating Fed policy, this isn’t necessarily a good thing for the long-run health of the economy.

Trading action in stocks will always be receptive to the news of the day. A great earnings report from any company will see the stock jump. But, in an economic environment of slow growth, it’s becoming more difficult for any industry to generate the kind of outperformance that investors want to pay for. The state of the equity market remains fragile.

It’s definitely a trader’s market and, if you don’t own the right stocks, you are way underperforming. For speculators, the best moneymaking sector has been gold and silver stocks. The best value now for risk-capital investors is in U.S.-listed Chinese shares. Surprisingly, some of the best stock market performances over the last couple of months have been in a handful of large-caps. The stock price of E.I. du Pont de Nemours and Company (NYSE/DD), or DuPont, has been super strong since the beginning of the year. The same goes for Caterpillar Inc. (NYSE/CAT) and IBM Corporation (NYSE/IBM). All three are Dow stocks.

But the good news is few and far between. A lot of other Dow stocks are stuck in the doldrums. General Electric Company (NYSE/GE), The Procter & Gamble Company (NYSE/PG) and Intel Corporation (NASDAQ/INTC) are just a sample of many Dow stocks that haven’t done a thing all year. There are plenty more of these large-caps that are actually down since January. It makes me wonder just how the broader market has done so well over the last six weeks.

Earnings seasons are always important and the best time to be scanning the landscape for new investment opportunities. This earnings season is particularly important because the third quarter really was a transition period when a lot of government stimulus programs were withdrawn from the economy. In the first two quarters this year, a lot of big companies reported flat to modest revenue growth with surprisingly strong earnings results. Many companies reported that they were actually able to raise their prices without affecting demand. This earnings season, it will be very interesting to see if this trend continues. My best guess is that only those companies with substantial operations in Asia will show any strength in earnings. The rest of the equity marketplace is still very much in a fragile state.

Retire on one hot stock

Presenting Our Top Stock Pick for 2015!

It is one of the leading companies in its industry. With quarterly revenue of $800 million and growing this company is generating over $300 million every three months in free cash flow!

"A Golden Opportunity for Stock Market Investors" is yours FREE when you opt-in to get our daily e-letter Profit Confidential. With Profit Confidential you are receiving the opinions and commentaries of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate, and other investments so we can tell you what we believe today's financial news will mean for you tomorrow!

Combined, we have over 100 years' experience in analyzing various investment markets. Our analysts include MBAs, BAs, B.Comms, P.Engs, MAs, LLBs...and most importantly, years of experience investing and managing our own money successfully!

To opt-in to our FREE e-letter Profit Confidential and to get your FREE report, "A Golden Opportunity for Stock Market Investors," enter your e-mail address in the box below. You can unsubscribe at any time.

We hate spam as much as you do. Check out our Privacy Policy.

About the Author | Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »

Related Articles

Video: Here is why you should be Bullish on Gold | By: Michael Lombardi


Would you vote for Donald Trump if he was the Republican Nominee?

View Results

Loading ... Loading ...
Profit Confidential
From: Michael Lombardi, MBA
Subject: Gold: The Stock Contrarian Investors’ Best Play of the Decade

Read this message