Sector Trends

The sectors that are performing well are the ones from last month (oil, oil drillers, natural gas, & related energy) and basic materials (steel, metals, uranium, gold, textiles, & chemicals). Some selected retailers are perking up too. Housing related stocks should begin to cool off after a long bull run.

The real keys to what sectors to buy are crude oil prices, interest rates, and China ’s economy. The CRB index provides clues to China ’s economic condition. I don’t believe China ’s economy will cool substantially, but the rate of increase may level off somewhat. If energy prices continue to soar, it may become necessary to lighten the stock portfolios, or take action to protect our holdings using protective puts as insurance.

Another clue to our economy will be how our college seniors fare in finding suitable jobs once school lets out for summer recess. Sometimes when jobs are short, students stay in school for a graduate degree. I believe the overall increase in graduate school enrollment is probably a leading indicator that hiring and the economy are worsening.

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