Thursday, May 8, 2008

Bullish Trend Wearing Out?

Now that earnings season is winding down, there doesn't seem to be a lot of bullish catalysts to drive stocks higher. Meanwhile, consumers are getting hit on all fronts with high food and energy inflation, and uncertainty about their home price.

If food inflation continues to rise, the new presidential administration could feel real pressure to change our course on ethanol, which could unwind the agribusiness trend.

I think another trend will be US infrastructure spending, and its something that is already in play. Bridges and roads are going to be updated, but with the construction slowdown, its hard to find a pure play here.

I'm continuing to like oil service stocks (think NE, NOV) and Steel stocks (think MT, X, RIO).

There are some nice opportunities in stocks, but you have to be careful because its not stocks across the board, but in sectors that benefit from inflation and/or a weaker dollar.

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