Insights & Advice

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Markets Bolstered by Jobs Rate

All week the tension built. After Monday’s big move upward, traders were convinced that it was time for a market pullback; after all the S&P 500 Index had finally clawed its way back above the 1,000 level. Surely the markets would pause here, they reasoned, and Friday’s unemployment number would be the excuse. Wrong!

Sure, the “whisper” number circulating around trading desks was a loss of “only” 250,000 jobs. It was the reason the markets mostly churned all week, opening down in the morning but paring losses by the close. The consensus economic forecast was that employers would cut 375,000 jobs, which would be an improvement over last month’s number. Bears and bulls alike were therefore shocked when the number came in at 247,000 jobs—a decline in the unemployment rate to 9.4% from 9.5%.

As a result, all three averages vaulted to new yearly highs from the opening bell and never looked back. Bullish sentiment was everywhere and investors couldn’t buy enough financial stocks in their hurry to put more money in the market. AIG, the enormous insurance company that we the taxpayers bailed out last year, reported a second quarter profit, its first since 2007, which added further cheer to the bulls.

And as a departing gift from the U.S. Senate Thursday night just before the summer recess, the ‘cash for clunkers’ program was given new life to the tune of an additional $2 billion in new funding. For investors, it appeared to be raining good news after a week of spotty macro economic data.

“I’m bullish here,” says Paul Frank, Portfolio Manager for the ETF Opportunity Fund (ETFOX) based in East Chatham, N.Y.
It’s been six months since I featured his fund in my column. In the meantime, ETFOX assets have grown from $11 million to $71 million while the fund itself is up 18.05% so far this year.

“I expect to see 1100 on the S&P 500 by the end of the year,” he predicts, “and right now I have only 1% of my fund in cash.”

Frank, who runs the fund from his farmhouse in Columbia County, likes the market in general and several sectors in particular including Defense and Aerospace, biotech, as well as silver.

“The fund has been so successful that I’m planning on launching a second one by the end of the year. This one will be a global fund,” Frank revealed.

Frank is not alone in his bullish attitudes. An increasing number of market analysts and pundits are taking a bullish stance on the back of data that indicates if not a full- fledged recovery, at least a slowing in the rate of decline in the economic indicators.

As for myself, I remain positive on the markets in general but would not be surprised if we experienced a minor pullback in the near term. Minor to me would mean a pullback to the 1000 level which should provide good support for the S& P 500. If such a correction were to be deeper, say down to the 950 level, I would stay the course and simply consider it another opportunity to add money to existing positions. As I write this column, the S&P is now up 50% from its March bottom.

Posted in A Few Dollars More, At the Market