Financial Professionals


U.S. Jobs Report's Impact On Asset Classes

One day after receiving better-than-expected global manufacturing figures, U.S. monthly labor figures were released the morning of September 2.
The report showed that for the month of August:
•         0 jobs were created vs. +50,000 estimate – the lowest headline figure since the September 2010 report (released October 2010).
•         17,000 private sector jobs were created vs. +75,000 estimate.
•         The unemployment rate remains unchanged at 9.1%.
•         The underemployment rate rose from 16.1% to 16.2%.
•         The Verizon workers’ strike contributed to a 48,000 decline in information industry jobs.
COMMENTARY: As the calendar moves closer to year’s end, the continued push-pull between earnings, manufacturing tailwinds, and governmental headwinds weighs upon asset prices. Washington’s inability to meaningfully reduce the long-term deficit, while debating the measures in full public view, precipitated in an early August capital markets’ sell-off that has yet to be reversed.
Today’s dismal jobs report is a direct result of the private sector’s loss of confidence in the public sector’s willingness to do what is necessary to sustain the recovery begun in the spring of 2009.
I expect today’s jobs report will have the following impact on the S&P 500® Index:
•         Limited upside potential beyond 1325.00 for 2011.
•         Near-term resistance is in place between 1240.00 and unchanged for the year at 1257.64.
•         The May 2 “Bin Laden” high of 1370.58 is most likely the high for 2011.
•         I do not expect 2008 all over again. Support will be found near the early August 1101.54 low and limit any 2008-style downside potential.
My expectations for select asset classes:
•         Corporate bonds, in particular investment grade, remains the one asset class in which confidence is evident. 
•         Municipal bonds will continue as a favorable 2011 asset class.
•         The search for yield and resilient earnings is supportive of utilities. 
•         Global spare capacity of oil remains challenged and will support the energy sector.  
•         The strength of select corporate balance sheets will continue to attract investment inflows.
•         Multinational corporations that deliver consumer staples to emerging market consumers remain attractive.

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.