Homes & Jobs

We know that the consumer is 2/3 of the American economy.  So, with home prices falling and home equity withdrawal at basically zero now after being so high for so many years, it’s no shock that spending is falling and hurting the economy in a bad way.  On top of that, you add more and more people losing their jobs, and you have a struggling economy which leads to a struggling stock market.  This is why you hear so much on the news about upcoming jobs reports.  Will they be bad?  Will they get worse?  Yes & Yes.

Below is a picture I’ve posted before which is the unemployment rate (inverted) on top of the S&P 500.  The latest unemployment rate is 6.5% and some estimate it could reach 9% by the time it’s all said and done.  You’ll notice the stock market leads good economic data and unemployment turning around.  However, on the way down, it lags.  Perhaps we (the stock market investors) are optimistic people and then we’re in denial when things get bad.  Here’s the question I get a lot:  “Hasn’t the stock market discounted the bad news?”  My answer is essentially no.  The reason I say that is because I believe the market discounts out 6-9 months.  Based on all the research I’ve done, I think the economy will be worse 6-9 months from now, not better.  That means I’m not real excited to load up on stocks just yet.  More importantly, I don’t want to buy until I see some commitment by others to buy equities.  Sure, I may do some trades but I’m keeping it light.  All that is going on right now is trading, not investing.  Feel free to participate in the trading as there are opportunities.  Volatility can be a good thing.  Just be careful.

unemployment-rate

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KARL’S TWITTER (www.twitter.com/karleggerss)

  • Steady decline in the ADV/DEC all day on the #NYSE. 2 hours ago
  • Earlier this month, the odds of a December Fed hike were at 20%. Today, 63.8%. 1 day ago
  • Rate hike odds for rest of year according to Fed Funds futures: 11/1/2017: 2.8% 12/13/2017: 63.8% 1 day ago
  • Big beat by Philly Fed manufacturing index. 1 day ago
  • Initial jobless claims: 259k vs. 300k est. 1 day ago
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