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Wells Fargo triggers US stock market fall

The Dow Jones Industrial Average has closed down by 1,175 points in the biggest one day fall since the financial crisis.

Federal Reserve sanctions against Wells Fargo may have triggered the fall. Regulators are requiring a shakeup among the bank's board members, and are limiting assets to no higher than end-of-2017 levels. → read more 

Should people keep riding the market and holding at what has been winning, or should they bet on recent losers — a variation on the long-running Dogs of the Dow strategy, which holds that betting on a diversified set of recent blue-chip losers is a path to future outperformance.

According to historic records, the winning approach is to focus on sub-industries that have done the best and the worst in the run-up preceding the correction. There are 145 sub-industries represented in the S&P 500, and it may be advisable to pick the highest-rated company in each of the 10 best and 10 worst sub-industries on CFRA’s rating scale. That will lead an investor to about 20 stocks to choose from. Since 1991, following this strategy every year has produced 13.6% annualized returns, beating the market by 5.5 percentage points, and topping the S&P 500’s price gain 70% of the time. If history is any guide investors have done better buying both last year's 10 best and 10 worst groups. The following article gives a perspective of what is happening now.

Dow Jones hit by worst fall since 2008

New York, Feb.5.– The leading US stock market index closed down 4.6% at 24,345.75. 

It is The worst drop in points since September 2008 when a plan to rescue the US banking industry was rejected.

The decline extended losses on Friday, when strong wage growth data raised the prospect of accelerated interest rate rises.

Monday's sell-off surpassed a 777.68 points drop on the Dow Jones on 29 September 2008 when Congress rebuffed a $700bn bank bailout plan following the collapse of US investment bank Lehman Brothers earlier that month.

The decline in the Dow was closely followed by the wider S&P 500 stock index, down 3.8% and the technology-heavy Nasdaq, down 3.7% ...

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