Commodity prices (especially oil, gold, and silver) have been falling sharply since July 15. Unfortunately, prices at the producer level and the consumer level are still rising.

Commodity prices had been soaring since last November, and producers couldn’t raise the prices of their end products fast enough to keep up. So you can understand if they are hesitant to freeze prices or lower them now that commodity prices are falling.

Combined with inflation running high and consumer confidence running low, this means the retail sector will struggle in the coming months. Most of the companies in the sector have already reported second-quarter earnings. And most were able to meet or beat expectations. However, a number of them have lowered expectations for the third quarter.

Unfortunately, there isn’t an ETF that makes money when the retail sector goes down. However, staying away from the retail sector can benefit your portfolio. Should the economy turn around in the fourth quarter, retailers will benefit at Christmas time. By then, their earnings expectations could be extremely low and easy to surpass. So stay away from the retail sector for now… but look at it again come the holiday season.

[Ed. Note: Making money these days is as much about knowing what NOT to buy as it is about buying right. Investment analyst Rick Pendergraft can show you an embarrassingly simple system he uses to make investing decisions. Learn the details

Inspired by his high school economics teacher, Rick Pendergraft fell in love with the markets at an early age. He entered his first investing competition at 17, and opened his first brokerage account before he finished college. At the age of 23, on the third options trade he had ever placed, Rick turned $1,800 into $22,000 in less than a week, when the company he bought became the target of a takeover. He admits it was a stroke of luck, but it was a memorable education as to the leverage that options can provide. After a ten year career in banking, Rick decided to pursue trading full-time. To get his foot in the door, he started out in the sales department at Schaeffer's Investment Research. It was not long before his talent was recognized and he was invited to apprentice under Bernie Schaeffer, one of the top options traders in the world. Rick thrived in his new position and twice received the award for "Top Trader."Rick has developed a loyal following of readers who are grateful for his timely warnings and profitable advice. He is widely recognized as a market expert and has been frequently quoted by Reuters, BusinessWeek, Forbes, USA Today, the New York Times, and the Washington Post. Rick's primary focus is on identifying short and intermediate term rising and falling trends in the major market sectors. His analysis is based on technical factors along with indicators of market sentimentRick lives near Delray Beach, FL with his wife and three children.

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