Is the worst over?
After last week’s sizable stock market downdraft, which crushed the Nasdaq’s priciest and riskiest names the most, investors will be watching to see if the bleeding stops when trading resumes Monday — or if the pain spreads in a more significant way to the market’s blue chips.
There’s one big difference between the current pullback and the steep drop to start the year: The losses this time are concentrated in pockets of the market deemed speculative, such as technology, biotech and small-company stocks.
The Nasdaq, home to many former high-fliers, has plunged 8.2% since its March 5 high, vs. a 5.8% drop during its early-year dive that ended Feb 3. The blue chip Dow Jones industrial average, which fell 7.3% at the start of 2014 before rallying back within 4 points of its record close, is down 3.3% in the current funk.
“The more conservative names have been holding up well, and the more aggressive names are in a bear market,” says Patrick Adams, a portfolio manager at PVG Asset Management.
The upshot: Investors with less-aggressive and more-diversified portfolios haven’t suffered portfolio-crippling losses, at least not yet.
The most pain has been inflicted on popular stocks that shot up the most in 2013 and earlier this year, only to flame out as the “momentum” trade reversed.
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SOURCE: Adam Shell