Today's message from the market: Get ready to read some horrid headlines from Spain.
Trade the markets for more than a month and you'll come to appreciate the old trader's wisdom that the market always leads the news… and rarely the other way around. For example, U.S. homebuilder stocks turned lower in 2005 well before the housing/credit crisis hit in 2007. For a "future example," we present the past 18 months of trading in the iShares Spain fund (EWP).
EWP is one of the largest and most liquid ways for U.S. investors to buy and sell Spanish stocks. The fund tracks the Spanish stock market. As you can see, EWP is tracking it right into the ground. Shares are down 39% since January. And just last week, they struck their lowest low in over a year.
Spain is dealing with a crushing 20% unemployment rate and a huge budget deficit… which just produced a cut in its sovereign credit rating. Its stock market is signaling things are about to get worse. Since stocks lead the news, get ready to hear that "the rain in Spain" is coming down hard.
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