The problem with our market is the very stocks the market wants to rotate into are the most expensive!
Yesterday they was an undeniable pull towards safety stocks big pharma, mcdonalds etc...
FT.com
Expensive defensive stocks
Tuesday April 17, 5:25 am ET
Compared with their bond market peers, investors in US equity markets remain notoriously optimistic in their economic outlook. Or so the conventional wisdom goes. Dig a little deeper, though, and the message is a lot less clear than the near doubling of the S&P 500 since its 2002 trough would suggest.
For one thing, shares have lagged behind rapidly expanding earnings. That has left the market as a whole trading at just over 15 times underlying earnings on Standard & Poor's bottom up estimates for 2007, leading some to conclude that even a few quarters of lacklustre growth need not spoil the party. The aggregate, however, hides as much as it reveals.
Among the sectors commanding high price/earnings multiples, a revealingly large number are in areas that should do comparatively well during a downturn. Consumer staples, for example, trade at about 18 times earnings. This is roughly matched by such businesses as Anheuser-Busch or PepsiCo. Companies credited with earnings growth potential, such as Procter & Gamble or WM Wrigley, are a lot dearer still.
Similarly, the slightly more cyclical consumer discretionary sector, which includes media companies and the likes of Target, McDonald's and Nike, trades at almost 20 times earnings. Healthcare, telecommunications and utilities are also valued more highly than the broader market, if less aggressively so. Among classic favourites in rising markets, by contrast, only information technology commands a premium rating.
For the S&P 500 as a whole, all of this is offset by the low ratings of financials - the largest earnings contributor by far - and energy. Investors are certainly wise not to expect peak-level earnings in those industries to last forever. Unfortunately, they have also driven up relative valuations of more defensive sectors in the process - including ones with fairly direct exposure to slowing consumer spending. The mundane headline valuation of the S&P 500 may offer far less protection than at first appears when peak profits begin to fall.
>> My take> without tech we are going NOWHERE. So it's belly up to the bar time- don't buy Bud buy Budski Nanotech!
