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Wednesday, September 13, 2006

How About Industrials?

It happened.. the market rallied as we predicted with lower commodity prices easing inflation concerns. We believe this market has some more room to go before it calls it quits and concerns about a slowing economy set in. Rising most notably along with the market rally were the cyclical stocks that should benefit, namely technology (XLK) and consumer discretionary (XLY). The noticeable laggard is the industrials (XLI), mainly because of the likes of CAT and JOYG who serve commodity producers whose businesses may slow down due to lower commodity prices. However, a lot of industrials input costs will go down due to cheaper raw materials, and we believe they will play catch up. Just avoid the ones related to commodities businesses. I'm having problems posting the charts. I'll post them when I can.

TERENCE

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