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Falling Employment Can’t Faze Markets
The private sector only created 18,000 jobs last month, short of even the most pessimistic forecast. Yet stocks managed to stage a late day rally, erasing most of the shock and awe from the open. What is there to learn from today’s market action?
For starters, traders seem to think that the bad report—and the bad report from the prior month—were nothing but flukes. The recovery is certainly slower than expectations, but it is a recovery. The groupthink seems to indicate an updraft in the fall.
And with rates so low, there aren’t many alternatives to equities. A modestly diversified portfolio of dividend-paying stocks may yield 3-5%—nothing to sneeze at in the current low-inflation environment—and it beats the pants off high-quality corporate bonds or CDs.
Finally, there seems to be continued confidence in earnings growth. Investors appear eager to have exposure to stocks as earnings season approaches.
As a believer in the notion that groups can often be savvier than even the smartest person in them, I believe that today’s recovery after the horrific jobs report is an indication that stocks could very well trade higher in the next few quarters.
About the Author
Ben Warwick, Quantitative Equity Strategies
Veteran investment strategist Ben Warwick brings 20 years of investment management expertise to AdvisorOne.com in his blog, Searching for Alpha. His market and economic insights provide readers with an insider’s view on generating alpha through asset allocation, the use of strategic portfolio “tilts” and alternative investments.
Ben Warwick founded Quantitative Equity Strategies (QES) in 2002 as a platform for implementing his quantitative investment strategies. The firm manages assets with traditional long-only equity and fixed income, private equity, managed futures and alternative investment mandates. QES has developed an industry leading expertise in building investment programs that can replicate alternative returns, while offering daily liquidity and transparency. These products include the HFRq, a hedge fund replication strategy developed in concert with Hedge Fund Research in Chicago; the Managed Futures Beta Index, with Aspen Partners; and the Nomura QES Modeled Private Equity Returns Index (PERI), which was developed with Nomura Bank and Preqin, the leading source of information in the private equity industry.
He is the author of several books, including "Searching for Alpha: The Quest for Exceptional Investment Performance," (Wiley, 2000) and "The Handbook of Managed Futures," with Carl Peters, (McGraw-Hill, 1996). He can be reached at ben@qesinvest.com.
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