Friends
The just reported jobs number was extremely disappointing, but not that surprising after we got a heads up on Wednesday from the ADP number that job creation has slowed. Along with that, the unemployment rate is ticking back up with the reported number today being 9.1%. Stocks and bonds had already responded on Wednesday and Thursday to the onslaught of disappointing economic news and the stock futures this morning look to continue the decline. In terms of critical S&P 500 support levels, we are watching to see if first 1305 can hold (which looks violated already this morning) and even more importantly can 1294 hold as major support.
Now, the major question is, are all these disappointing economic numbers just a bump along the road to recovery, or are we heading towards a “double dip” recession which the bond market seems to be hinting at. Again, we are market observers, not economic forecasters, so what we focus on is how markets react to various situations and conditions. We will watch to see if the stock market continues its decline, or has this slowdown been priced in over the last 30 days. We will also continue to keep a close eye on the bond market, whose drop in interest rates recently has been signaling an economic slowdown. It will be important to identify the difference between the need to manage risk as we enter the summer, and the potential opportunity that arises when markets move quickly.
The key to successful investing is to understand your ability to handle volatility and risk, so that you are able to take advantage of price dislocation. Bargains are only able to be taken advantage of if you are comfortable with your risk management implementation. In other words, you can’t take advantage of a cheaper stock price, if you are so out on a limb risk-wise that you can’t sleep at night. Hence, the CHJ motto of protect and grow. Because we are comfortable with our protection process, we are able to look at price declines as the equivalent of a “blue light special” at the old K-Mart (there I go dating myself again), or for you younger folks, a Groupon special.
We will be watching for the opportunity that develops from the litany of economic news that will be focused on in the coming weeks. We can’t control what happens with the political wrangling that surely will continue as the debt limit looms, but we are constantly on the lookout for opportunities that result from price volatility.
Have a great weekend everyone. We will keep you up to date with the market movements as they occur.
