The Market's Severe Case of Flu

This weekend, I battled influenza. Night sweats, fever, shakes, shivers -- you name it, I've been experiencing it.

Ironically enough, Mr. Market seems to be every bit as shaky as my body. Indeed, the subprime virus has infected Mr. Market, as well as his brothers in Europe and Asia.

It's important to note, far too many people believed that moving offshore would single-handedly shield them from U.S. recession fears. Yet global investments plunged over the weekend and set up an ominous start to the post-holiday trading week stateside.

What's important to recognize in this eerie "season of selling" is that, Mr. Market is sick. What I mean is, Mr. Market may require rate cut antibiotics and a power boost from Congress, but this IS NOT the "death of equities."

Some of you may remember when a single hedge fund (Long-Term Capital) nearly brought the world to its knees during the 1998 currency crisis. Mr. Market fell 18% from his high point, and the popular Nasdaq was down more than 34%. Result? Stocks marched 42% higher over the next 18 months... and more than 100% for the Nasdaq.

Perhaps there's a better example in 1990. We had a financial crisis in the savings-and-loans. We were coping with recession. And Mr. Market sank 20% from July 90 to October 90. Yet Mr. Market powered through the recessionary period in 1991, and garnered 25% in the year. (And we all know the run it had throughout the 90s.)

I am by no means trying to sugar-free coat the severity of Mr. Market's illness. That said, it's important to recognize the resilience of stock assets.

I myself... I've insulated against a lot of the risks with some of the lowest-risk ETFs available. Foreign Treasury Bonds (BWX) and Emerging Market Bonds (PCY) have kept client portfolios in check. Meanwhile, losses in Medical Devices (IHI) and Global Consumer Staples (KXI) have been smaller, relatively speaking.

Astute observers may be willing to take a look at yesterday's developments with an eye toward the future; that is, might worst move into first?

For instance, yesterday's 3/4 Fed Funds rate cut gave a shot in the arm into Retail (XRT) and Financials (XLF). Even as the rest of the market struggles, the beaten-downs are finding buyers.