The market seems appears to be moving from a period of greed to a period of fear. World markets are pricing in re-newed problems in Europe, particularily in Greece, where Government bonds yields recently reached 17%. The market is also fretting about higher energy and material costs, combined with slower growth ahead. Finally, investors are pricing in the end of QE2 ( the US government's program of adding liquidity and capital to the economy - boosting asset prices) in June. Some of the first casualties of this downward repricing has been the retailers. Several retailers over the last month or so have been whacked -for the reasons above. Most of these retailers depend on discretionary spending to survive and prosper. Investors are clearly worried about the future of consumer spending and the economy.
I would expect the sell off in commodities and cyclicals to continue as the market grinds lower over the summer. This pull back in retailers will - at some point - present a buying opportunity. But it's early, so I'll wait for lower prices. My short list of retailers includes Rona, Big Lots and Best Buy.
Now is a good time to have cash.
No comments:
Post a Comment