The debate rages over whether or not the U.S. economy is in or heading into a recession. As I have said in a previous post, as long as growth is slowing it will feel like a recession. However, the recession may be felt more on Wall Street than on Main Street.
Think about who is being most negatively affected. Not much has changed on Main Street. Job Growth has slowed, but has not begun to shrink (we are below the replacement rate). Most of the pain is being felt by Wall Street firms which believed formulas could be trusted to manage risk with out intensive oversight and risk management. Fire and forget may work with guided missiles, but not with misguided strategies.
Some pundits insist that Main Street is feeling the pain in the form of falling home prices. Though this may be true when viewed from the peak of the market. Most markets exhibit higher prices than at the beginning of the housing bubble. Those who are hoping that the Fed eases sufficiently to reinflate the bubble are either irresponsible or stupid.
My confidence in the economy is such that I thin that the 2/1 Nonfarm Payrolls report will indicate that the economy has added 90k+ jobs.
My opinion that the Fed is fostering some inflation pressures (may be necessarily) that I believe that we will see a 10-year treasury yield of over 4.50% and a 30-year gov't bond yield of at least 5,00% by year end.
Tis bind market screams for a barbell using CDs or agenices on the short end and corporate bonds and preferreds on the long end.
4 comments:
Don't worry about it. Employment numbers in and of themselves are nonsense. Do we really want to make investment decisions on the basis of information supplied haphazardly by low level functionaries in far flung corners of this country or as the result of telemarketer's survey? I think not. Unless you are day trading, don't worry about market timing, just get the overall picture right.
Isn't employment historically a trailing market indicator anyway?
Yes. I wouldn't even look at the current month. Look at the revisions to the back months.
That is true and we did have nice revision. Employment is coincidental, Jobless Claims are considered by some to be leading
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