Pe Ratio Strategies

Consumer industries probably sound like the least possible prospect for your money at present. With consumer spending (allegedly) starting to flag and with inflation creeping upward, isn’t this just the time to retrench your position and go back into traditional, must-have industrials that might be just a little more resilient?

Er, no. Or not, at least, as far as the US is concerned. If the current slump in tech stocks has proved one thing, it’s that the underlying position among traditional US industries is still pretty dreadful. Do you wonder why the price/earnings ratio on the Standard & Poor’s Industrial 500 has dropped from 39 to 26 in a year? It’s because the tech shakedown has revealed a worrying lack of productivity growth (though the position in Europe is very much better). Utilities and transport stocks are mired in cartellistic behaviour that would shame many other countries, and efficiency is still a dirty word in heavy industry. Everywhere you look, there’s overcapacity.

Pe Ratio Strategies & President Bush

If (and only if) President Bush looks like delivering on his promises to cut taxes, there may very well be a good case to be made for transferring some of your portfolio into the types of stocks that cater for consumers rather than businesses. US consumer stocks have been lifted by reports that Christmas sales were virtually at record levels, and consumer studies still show an overwhelming confidence in the economy. We should be in a better position to judge the situation once we get some better information about Christmas profit levels, as distinct from mere turnover. But meanwhile it’s a thought worth bearing in mind.