What's Real?

May 8, 2015

 

A new report shows that the American employment situation marginally improved in April, but new revisions to prior reports make March’s meager job gains look even worse. The Bureau of Labor Statistics reported Friday morning that U.S. non-farm employers added 223,000 jobs in April, bringing the unemployment rate down to 5.4% from 5.5%. The BLS also said Friday that employers added just 85,000 jobs in March, down from the original 126,000 estimate.  April's numbers were strong enough to signal a rebound from the economy's first quarter decline, but weak enough to hold off Fed rate hikes until the second half of the year, or even longer.  The stock market is trading higher today, once again, seeing weakness as good news.

 

It seems this has been the trend over the last several years where bad economic news becomes good news to the stock market.  Low interest rates have help create money flows into equities that have helped boost returns regardless of underlying fundamentals.  Bad economic news becomes good news to the stock market.  At some point, true underlying fundamentals will matter.  Also, the average intra-year drop of the S&P 500 over the past 35 years has been -14.2%.  This hasn’t happened since 2011 and leads one to believe that a true market correction is long overdue.

 

Visit our website at www.windsoradvisor.com to read our May Newsletter.

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