Fearing a recession
While much of the attention in the media of late is tied to the upcoming elections in November and whether the liberal left or conservative right will gain the White House, the global economic condition has been all but neglected.
We fear a recession tied to global economic stagnation is forthcoming, and would advise investors to examine their investments to determine the risks inherent in a recession. For now we prefer the proverbial mattress. Now for some information...
Treasury bonds closed Friday at 165 03/32nds, down 10/32nds on disappointing data pointing to a slowing U.S. economy. On Friday the Labor Department reported only 160,000 new jobs created (questionable quality jobs) against expectations for a 200,000 job gain. Jobs participation also disappointed economists as only 62% of the labor force is working.
While hourly pay rose 2.5% for the past 12 months, a gain from 2.3% lent to the idea of a tighter labor market and for inflation to pick up. We disagree since the overall unemployment data does not include the "under employed" which would prompt a figure of nearly 10% rather than the 5% reported. We prefer the sidelines but look for yields to continue low and bond prices to stabilize and work higher.
The Dow Jones Industrials closed at 17,740.63, up 79.92 points as IBM led the gains by adding 1.5% to its price. For the week the Dow lost 0.2%. The S&P 500 closed at 2,057.14, up 6.51 points but for the week lost 0.4%. The tech-heavy Nasdaq closed at 4,736.16, up 19.06 points but for the week lost 0.8%. Biotechnical stocks sold off impacting the index. With no measurable advances in earnings we continue to feel the implementation of strategic hedging strategies is appropriate for holders of large equity positions.