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

09/02/2011
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.

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