It looks like we are in a bear market. There are a few indicators that point to that conclusion but I’m going to look at just two of them today. The first indicator is a chart showing the percentage change in the prices of the Dow Jones components over the past four weeks. Notice that IBM (NYSE: IBM) and Apple (NASDAQ: AAPL) are near the bottom. Procter & Gamble (NYSE: PG) and McDonald’s (NYSE: MCD) are at the top. In bear markets, investors tend to like McDonald’s. At the worst point of the 2008 bear market, MCD was… Read More
It looks like we are in a bear market. There are a few indicators that point to that conclusion but I’m going to look at just two of them today. The first indicator is a chart showing the percentage change in the prices of the Dow Jones components over the past four weeks. Notice that IBM (NYSE: IBM) and Apple (NASDAQ: AAPL) are near the bottom. Procter & Gamble (NYSE: PG) and McDonald’s (NYSE: MCD) are at the top. In bear markets, investors tend to like McDonald’s. At the worst point of the 2008 bear market, MCD was only down about half as much as the S&P 500. Over the full course of that bear market, the stock lost just 7%. This chart shows investors are shifting to defensive stocks. That can be seen in the next chart, which looks at the changes in different sectors over the past three months. Consumer staples, healthcare and utilities are the classic defensive sectors. These include companies like Procter & Gamble in the consumer staples sector, drug companies in the healthcare sector and your local power company in the utilities sector. These are the kind of businesses that offer… Read More