The Large-Cap Trend is Very Revealing

And now some reflections on large-cap stocks. The trend in many large-cap stocks is telling, and the outlook isn’t particularly good.

General Electric Co. (NYSE/GE), often considered the best- managed company on the planet, is having a tough time in this market. In fact, it’s been having a tough time since technology stocks collapsed five years ago.

Since mid-2000, the stock has dropped from $60 per share to under $25 per share. Recovering to the mid-$30 per share range over the last two years, the stock has once again resumed its downtrend over the last few months. As a market leader on Wall Street and Main Street, this price drop isn’t good for broader stock market sentiment.

IBM (NYSE/IBM), the technology powerhouse, used to trade around $140 per share several years ago, but the stock remains in a downtrend. Currently, the stock is trading around $80 per share, with trading volume decreasing.

Coca-Cola (NYSE/KO) trades for almost half of what it used to, while Merck & Co. (NYSE/MRK) trades for a third of what its stock price used to go for.

The only really large company doing great in this market is Exxon Mobil (NYSE/XOM), which is riding the current commodity price cycle.

The broad-based stock price weakness in most of our big corporations signals a tough stock market environment. Clearly, investments related to commodities will outperform for the rest of this decade. Most other market sectors, however, are likely to languish or post only modest growth.

This means you need to be extra cautious investing right now. This applies to the stock market and the burgeoning real estate market, where a bubble really does exist. In my mind, cash and commodities are the only games in town for the foreseeable future.