Kudrna's Stock Market Talk

The outlook on jobs continues to be a pain for any economic recovery even with some economic indicators, such as the market, saying we are seeing a recovery this very moment.  I do not buy into that overly optimistic statement and believe that is far too early for us to state with any accuracy.  Jobs are crucial to any economic strength and frankly, we do not have many new ones being created.  The recent numbers are filled with temporary positions such as the government hiring of census workers which will not last.  Many are rallying behind the 162,000 jobs created in March but I can not join in the enthusiasm at this juncture without feeling like the blind being lead by the blind.  I do not enjoy being negative in the least bit but truthfully, I can not be optimistic this early in the game.

With that being said, I do feel we have some strong months ahead of us which we are seeing now and should continue to see in future earnings reports.  I do not doubt the short-term strength.  This is a strong season for earnings and I feel the summer could be strong as well for many companies but not so bright after that.  The negative data seems to be overlooked these days as all I hear is economic recovery repeated everywhere I look.  If so, why did we have jobless claims unexpectedly rise to 484,000 instead of the expected decrease? Yes, I heard the Easter holiday argument but the point I am trying to make is this simple response to the rise was unexpected.  Many are being overly optimistic because the market itself has risen significantly but what will happen to the markets if we raise rates this year?  Let us not forget record numbers in foreclosures which seem to have gone unnoticed by many and the anticipated jump in crude oil prices / gas prices this summer which will surely put pressure on consumers. This oil price increase is reason I am making my portfolio overweight in energy to capitalize on a strong recovery in the energy sector.  The strong energy sector does not benefit the consumer though which again, seems to go unnoticed.  Everywhere I look, I tend to see praise for this recovery.

Some are claiming the opposite as consumer confidence recently dropped stating that we are too worried about the economy.  I do not seem to see many of these headlines myself but rather the economic recovery articles being touted.  Without beating around the bush, my concerns are how the third quarter will hold up as I do not feel confident that jobs will be stronger by then unless we can somehow change and blur another economic indicator format like we did with January unemployment figures that showed a decrease in the unemployment rate.  However, if they did not tinker with the format, the unemployment rate would have actually increased, unbeknownst to many who watch CNBC as their main source for financial information.  The part that actually frustrated me was how CNBC did not explain the format change to viewers but simply stated the economic recovery is here and now. I see us losing consumer confidence later this year as some of this data fluff may be realized and fourth quarter earnings may consequently be weak.

This belief is the reason why I am going to be careful with any long positions I own, come third quarter, and will look to reduce my positions if we have performed excessively strong since.  I feel this positive data may not hold through the year and hopefully I am just planning for the worst.  Even with my statements here, I am still hoping for the best as a negative economy does not benefit me in the least bit.  Let us all “hope” I am completely wrong and over-analyzing.  The problem with “hope” is that many times it clouds judgment and makes you more prone to overlooking red flags.  Time will tell, as it always does.  Good luck out there.

Mike

No positions mentioned

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Tags: Michael Kudrna, oil, Stock Market, Stock Market Commentary, unemployment rate

This entry was posted on Friday, April 16th, 2010 at 1:43 PM and is filed under Stock Market. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.