Markets

Sell now: These sectors will face irrecoverable losses

Investors need not fear an across-the-board, multi-year stock market crash, if for no other reason than the psychological component of the market prevents it from doing what so many people believe it will do. The average S&P 500 P/E Ratio is nowhere near the level that would trigger such a crash anyway. This fact was recently acknowledged before Congress by Federal Reserve Chairwoman Janet Yellen.

At the same time, however, Yellen called valuations in small-cap biotechnology and social media companies "substantially stretched." As I pointed out at the time , something would be very wrong with the market if these particular stocks did not have high valuations; a valuation is the Street's way of making a stock's risk more or less in line with its return.

The comment would have been perspicacious if delivered in March, before social media stocks fell by 27% in just nine weeks, and before biotechnology stocks fell 20% in just five weeks. No one is immune, it seems, from, the market's insatiable need to look to the past, expecting to see the future reflected as in a mirror.

So if biotechnology and social media are two dogs that have had their day, which dogs are headed for trouble now?

These dogs…

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This article was originally published on MarketIntelligeneCenter.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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