I have to make this quick but I want to mention it…
Here’s the CEO of Fedex, whose stock is tanking this morning after saying this, while slashing earnings and revenue guidance for 2009:
“This is very, very important, and I’ll just conclude by saying most of the issues that we’re dealing with today are induced by bad political choices, I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they’re all things that have created macroeconomic slowdowns.”
This past week, the Russell 2000 dipped below the 20% drawdown mark, representing a statistical bear market for small cap stocks, which are domestically focused companies. What Fedex is saying doesn’t just apply to global business. There is a global slowdown, a trade-induced slowdown and now a domestic weakness beginning to creep in. The S&P 500 gave up its 10% YTD gain and has since dipped as low as negative 5% on the year. The Nasdaq went negative too. Bank stocks were in a 15% drawdown at their lows this Monday. Semiconductors went off a cliff this fall. Homebuilding stocks have fallen 30% this year and the Transports are also in a statistical bear market from their highs.
Valuation didn’t help you in terms of portfolio construction this year. The cheaper stocks were actually hit the hardest. Why? Well, if they haven’t been performing