Tuesday, July 22, 2008

Leadership Needs to Come From Industrials

When you look at the current state of the market, its kind of been in disarray. Oil stocks are getting beaten down (although I'd be a buyer of select names), and the rally in financials has no substance to it. When you look at earnings, the large cap, industrial type names are the ones performing. I'm speaking pretty loosely when I say industrials. I mean mostly multinationals. United Technologies, Dupont, Johnson and Johnson, Intel, Nokia. They've all reported pretty good earnings, amongst a pretty difficult environment. The key for them has been less reliance on the US consumer, and less exposure to fuel prices.

The market has to let these companies provide our leadership now. If its bank stocks, no rally can be sustained, because they are too volatile. Energy stocks helped the market over the past year, but are subject to cyclical swings based on oil supplies.

It was impressive that the market rallied back from this morning's lows. The headlines were predicting some major losses today, and we were back up to level within a half hour. Thats positive. But can it hold?

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