Australian Investment Blog

Good morning everyone Overview With over 55% of the S&P500 stocks down in excess of 20% (the classic definition of a "bear market definition") it would be easy to conclude that the S&P Index itself (which has fallen 15.1%) is in the middle of a bear market correction. To Market Matters it still feels like we are in a simple correction to the 99% advance from the 1075 level in late 2011. Recently, the poor performing ‘quality’ stocks that have already endured a tough 6 months have, relatively speaking, been spared with the aggressive selling switching to the quality / leaders, especially in the NASDAQ. Last week demonstrated this trend perfectly with Amazon -14.5%, Facebook 7.2-%, Google -8.1%, and LinkedIn -45.2%; these are some of the stocks that have held the US market together in recent months. Notably, other quality sectors where investors are sitting on good profits and stocks trading on high P/E's have also underperformed recently e.g. Healthcare. It should be noted these stocks trade on very lofty P/E's valuations of 403x, 81x, 30x and 52x but Commonwealth Bank only trades on a conservative valuation of 14x!