Ugly Day for the Market Portends More to Come

By on June 1, 2011

Reality caught up with the market today as the stocks dropped over 2 percent.  Financials have been out of favor since February of this year as it appears the stabilization in real estate has been a mirage.  Housing oversupply will continue to be with us for several years. 

Market breadth has been on the weak side with fewer and fewer stocks participating in the bull market.   This was a pre-condition to the market top in February 2000 (which we are still below in the large cap indexes). 

High energy prices have cut GDP growth to minimal levels.  There’s not enough growth to service mushrooming debts.  Thankfully interest rates are still subdued and will likely remain so as long as the economy is weakening.

Reality can be harsh and investors should pay heed to the facts which don’t lend themselves to a strong upward move from this point.  Expect more weakness throughout the summer and into the early fall.

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