Market Outlook: 07-23-08

Robert Hsu, August 08, 2008

After a painful six-week losing streak, U.S. stocks have snapped back. Interestingly, financial stocks lead the rally as more than half of them have reported second-quarter earnings that topped analysts' estimates. Stocks like Citigroup, JP Morgan Chase, Wells Fargo and Bank of America recently delivered better-than-expected quarterly financial results, which were made easier because the estimates were way too low.

Because of this market rally, the Dow Jones Industrial Average had its best three-day gain in over five years. Last week, the S&P 500 ramped up 1.7%, the NASDAQ gained 2% and the Dow surged 3.6%.

It was interesting to see financials lead a major market rally right now since they have weighed on the market so much in recent months. Some investors think that now is the time to get back into financials, but I think that its going to take a lot more than one rally to turn the financial situation around.

Looking ahead, I am sure that as the financial sector gets back on its feet it will lead more market bursts. But I think we need to be a bit cautious when it comes to investing in financials. The sector may be having a big effect on the market, but financials are not stable enough to make them a good investment.

Instead, I recommend investing in stocks that are profiting from a steadier and more profitable trend – the economic emergence of China and other Asian countries. My Asia Edge subscribers have been profiting handsomely from the picks in our portfolio, and you can cash in on these opportunities, too. Just become a member of Asia Edge!

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