By most accounts, last Friday's discount rate cut by the Federal Reserve was intended to benefit the beleaguered credit markets, and by extension, lenders and other financial institutions that have suffered as a result of the current upheaval.
Given that, it is interesting that the biggest beneficiaries in performance terms since Thursday's close have been the materials, energy, and industrials sectors.
Some might say that means equity investors interpreted Friday's action as a routine step towards eventual monetary policy easing -- rather than an abrupt policy reversal to address a quickening credit crisis.
More cynically, it may have been seen as just another opportunity to re-enter or add to positions that have been in vogue among the leveraged speculation crowd for quite a while now.
Either way, the relative performance of various sectors over the past few days suggests equity traders might be missing the big picture.
|
Sector |
Return from 8/16 – 8/21/07* |
|
Materials |
3.90% |
|
Energy |
3.40% |
|
Industrials |
3.05% |
|
Utilities |
2.77% |
|
Financials |
2.65% |
|
|
|
|
S&P 500 Index |
2.26% |
|
|
|
|
Consumer Discretionary |
1.96% |
|
Information Technology |
1.78% |
|
Telecom Services |
1.54% |
|
Consumer Staples |
0.96% |
|
Health Care |
0.88% |
(*through 10:30 am this morning)
Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.
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