A Good End to a Good Week

The Broad Market portfolio was up a little more than 2% this week. The economic sensitivity of the portfolio helped, as did the Latin American names in the portfolio: SABESP, Cemex, Industrias Bachoco, and Grupo Casa Saba.

The week was characterized by a retreat from perceived systemic risk As the week went on risk went from general to localized. The true offenders in the subprime lending world were taken out and executed, and the rest of the market recovered.

I have been sounding bullish of late, but I want to caution you regarding the dangers of this present market. Though this panic did not spread to the market on the whole, it is possible that a future crisis might be more virulent. Remember, the current market prosperity relies on free trade in goods and services; any interruption of that could lead to a major decline. Bad FOMC policy is another risk here as well. Profit growth has slowed significantly as well. There are reasons to be concerned, but if you are concerned, tweak your portfolio toward less risk. Don’t leave the party entirely, but choose stocks with strong balance sheets and cheap valuations, and raise a little cash.

Full disclosure: SAB IBA CX SBS