Even if the economy as a whole is headed for better times in the second half, some industry sectors seem poised for their own double-dip growth recession. I call this problem "the MCI syndrome." It affects stocks in the telecommunications, airlines, auto and supermarket sectors. I think it's too early to step away from this rally because the economy is looking better and because the market's momentum is so strong right now. But I think it's time to sell stocks in those sectors with almost no prospects for future growth. These sectors have such extreme imbalances between supply -- way, way too much -- and demand that even a strong economic recovery won't push bottom-line results into the black. Investors who believe in a second-half recovery story should be selling stocks in these sectors into current strength and buying stocks in sectors with better prospects. Here are the sectors that I believe are most in danger.
A Rally Built on Hope
Friday's market action was a prime example of what I've called a rally built on hope. The market chose to look past awful unemployment numbers. True, the official unemployment rate climbed to 6%, but everyone knows the unemployment rate is a lagging indicator that gives a solid picture of where the economy is coming from. At least that was the talk on the trading floors. And the market's willingness to bet on hopes of a stronger economy in the second half got just enough from a jump in factory orders of 2.2% in March. That jump, in data announced just hours after the unemployment numbers, was much higher than the 1.2% gain economists had expected. And it marked the biggest increase in orders since July 2002. Put it all together and the indexes roared out of the gate.