Good Economic News: Can They Be Bad For Your Portfolio?

Ulli Uncategorized 2 Comments

After the economy has been given the death sentence on several occasions, out come Friday’s jobs numbers. While they are only one set of figures in the big puzzle, they were strong nevertheless.

The Labor Department said that some 180,000 jobs were added in March (168,000 were expected) and the jobless rate fell from 4.5% to 4.4%.

The bad news is that Wall Street has been living the dream that interest rates should be lowered at anytime. Strong economic numbers like these certainly won’t support the wishes of the traders.

The final reaction as to the interpretation will come Monday morning when Wall Street’s button pushers return to their electronic trading desks ready to put their well rested thumbs to good use.

There’s no sense in trying to figure out whether they will favor the Buy or Sell buttons. My wild guess is that the bias will be towards the downside—at least temporarily.

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Comments 2

  1. Ulli,

    I seem to remember reading in one of your on-line articles that you suggest accumulating future investment funds into a money-market vehicle until such time that you’ve accum’d enough to make a reasonably sized purchase of a no-load fund/etf.

    Well, given the recent conditions (read volatility) I’ve been accumulating in MM and not making new purchases.

    I see two important factors working at this moment: 1) since the “bottom” was reached on or about the 5th of Feb., we’ve established a new and robust uptrend, and 2) taken in the longer term, the overall uptrend is still positive.

    If you agree with any of this, what are your suggestions to someone with “new” money at this time? I know you’re currently scouting sectors for your latest buys but I have greater than 5 or 10% to buy in. I’m thinking either small incremental increase in something like Consumer Staples (VDC) or a larger buy into a total market fund.

    G.H.

  2. G. H.

    What I said was only in reference to 401k accounts, where it is better to accumulate a reasonable amount in money market before making a commitment to the market.

    For all other accounts, I suggest that you follow my incremental buying procedure to ease into the market. This will help avoid investing 100% at a possible market top.

    Here’s how I use that approach.

    A new client comes aboard, and I divvy up his assets into thirds. Given the current Buy signals in domestic and international funds, I would commit 1/3 of his capital to each of those areas and leave the final 1/3 in money market. As soon as some of the holdings have gained 5%, I will add more.

    Alternatively, you can use a portion of the final increment to invest in sector or country funds (I prefer ETFs) with strong momentum figures (as per my StatSheet). However, I would not commit more than 5% to any one sector or country.

    Ulli…

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