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Archive for September, 2010

August Job Data Encourages Market

Friday, September 3rd, 2010

This morning the August employment report was released and it has given a nice boost to the stock market today. The private sector job growth for the month was 67,000 jobs. Analysts had been expecting the private sector job growth to be only 20,000 jobs. The unemployment rate stayed edged up to 9.6% in August.

The past few weeks has seen all kinds of important economic information whipsaw the market in both directions. We have seen weekly jobless claims reach 500,000, which hurt the market badly. We have seen impressive manufacturing numbers, which helped the market in a big way. For the individual investor, it is certainly hard to tell what to make of the recent economic numbers.

What should you do in this kind of environment with uncertainty about the state of the economy? At this point it seems the economic recovery is still continuing, albeit at an extremely slow pace. As I have said many times before, the biggest key will always be the employment market. If employers start hiring on a larger scale, the growth for the overall economy will definitely show up.

Keep in mind that often times in a recovery from such a terrible recession like the one we saw in 2008 and 2009 it takes quite a while for the growth to get back into high gear. Why is this the case? Quite frankly, everyone is a little scared to invest their money. Personal investors are worried that the same market crash could occur that happened in late 2008. Institutions and money managers are waiting for more clear signs that the economy is strengthening. At the same time, corporations are also scared to put their cash to work. This is precisely why we see so many companies with huge amounts of cash on their balance sheet today.

I think for the next few weeks and months it would be wise to take a wait and see approach to the state of the economy and the stock market. Watch the weekly jobless claims number and the important economic data closely. If you need to be invested in the market in the short-term, it would be wise to consider high dividend yielding stocks because of their relative safety.

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