Market Insight - June 2011
Another tired summer sequel for financial markets, or something new?
There’s always a chance of something new when Hollywood brings back the same players over and over for another remake, but in most cases, its just a tired replay. Unfortunately, many of the same actors on the financial stage this summer made their debut in May and June of 2010. The slowing economy, the weak leading indicators, the slump in consumer confidence, the fears of default in the Eurozone. It’s déjà vu all over again. But will it end the same way? We think so.
We’re not making light of the bad news, though. Friday June 3rd, employment numbers were extremely disappointing. The unemployment rate rose to 9.1%. Non-farm payrolls increased a mere 54,000 last month, the weakest reading since September. Private employment rose to 83,000, versus expectations of a gain of 175,000 jobs, while government payrolls dropped by 29,000.
The data is especially painful given the backdrop of heightened expectations from the financial markets; however, the evidence suggests that the current weakness is much more likely a case of investors driving prices down in the short term, looking for a lower entry point and thus greater return expectations for the future, than a serious slump, or an end to economic expansion.