Word: sectored
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...sigh of relief. To be more precise, it's about institutional investors repositioning themselves in these stocks. Last year there was a mass exodus from financial stocks, and not just the banks. There was just too much risk, and it was too difficult to navigate through the financial sector to find stocks that didn't have subprime risk or related issues. Even the asset managers got hit by withdrawals and redemptions...
This year, financial-sector earnings probably troughed in the first quarter, so the risk becomes don't be too underweight. It takes a huge swing to go from not owning any financial stocks to being market weight in financial stocks. Big investors are scrambling to catch up. (Read "The Outlook for Stocks is Decidedly ... Mixed...
...much catching up still has to happen? Look at it this way: at the financial-stock peak they were around 27% or 28% of the S&P 500's total market capitalization; the financial sector got down to 9% at their low. Now they are about 12%. I believe the financial sector will rise back to 13% to 15%, which means the portfolio-readjustment buying isn't finished. But take note, the sector has had very big moves recently, and not all banks will be able to hang on for the next leg of this...
...demand. That's because miners, farmers and oil drillers, hit by the credit crunch, can't finance investments that would increase their production capacity. Many won't invest today even if they have access to financing because depressed prices make projects uneconomic. The amount of investment in the oil sector, for example, will likely be 30% lower in 2009 and at least 40% less in 2010 than was expected before the financial crisis, according to Merrill Lynch...
...disruption that a pandemic might cause outside the health sector--what Michael Osterholm, who heads the Center for Infectious Disease Research and Policy (CIDRAP), terms "collateral damage"--could be even worse. The "just in time" supply chain on which so many U.S. corporations rely leaves little slack and could buckle during a pandemic. In a report last year, CIDRAP noted that 40% of the U.S. coal supply, which generates half the nation's electricity, is shuttled from mines in Wyoming to the rest of the country by train. If a pandemic simultaneously sickened enough coal workers--or the tiny number...