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Vulnerability to Market Correction Predicted: Vitol Capital Management
Added: (Thu Jul 12 2007)
In Vitol Capital Management�s economic and investment update, Paul Smith, Managing Director of Investment Strategy, says that the weakening strength of the US stock market will make it especially vulnerable to corrective forces throughout the remainder of 2007.
Smith highlighted the all-time high valuation levels among common stocks and the fact that the market's strength is coming from a relatively limited number of companies.
Smith said, "The gains in the S&P 500 and the DJIA are deceiving, as the majority of stocks across the board actually declined. When you see reports that it was just fifteen companies that accounted for half the gains in the S&P 500 in 2006. And that 25 large technology companies account for 93 percent of the gain in the Nasdaq index. The other 4,500 companies in the Nasdaq were down an average of 4 percent.
"This hardly seems like a healthy and strong market."
However, Smith added that because most people do not look beyond the above indexes for evidence of market strength, "Investors have grown to expect unreasonably high returns and have unusually high levels of confidence.
Combined with the narrowness of the market's strength, I think we're especially exposed to a correction similar to the one seen last summer."
About Vitol Capital Management, we are a financial services and management firm providing services to the private and public sectors.