Look Out Below - What Looks Cheap Isn’t. Except…
Holy bottom is out investors. If foreign indexes are any indicator, we are in for a rough, bloody, scary Tuesday. Congratulations to those of you purchasing index puts on Friday, with the VIX relatively low last week, it looks like you’re in for a cherry morning. When all is said and done a TON of stocks will look cheap to you. Don’t be fooled. With a recession looming and analysts slow to lower expectations, this is not the time to be buying stocks using their P/E multiples (if it ever is).
That said, I’d like to make two exceptions: Energy and Healthcare. If we assume a 5-10% decline in earnings and look at historical and S&P P/E ratios, Healthcare, Energy, and Technology are the only sectors that are truly cheap. I am throwing technology out. That said, if you must bargain shop take a look at the ETFs surrounding these sectors.
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