Yesterday’s update on the ISM Manufacturing Index offers another encouraging data point that builds on the acceleration in jobs creation via ADP’s November employment report. If it wasn’t for ongoing euro crisis and the potential for instability in the budget negotiations in Washington, optimism would be a no-brainer. But we live in interesting times, and so expectations must be managed carefully.
Jobless Claims Rise For 2nd Week In A Row
New jobless claims rose last week, taking some of the wind out of yesterday’s inspiring rebound in ADP’s November employment report. Filings for unemployment benefits increased 6,000 to a seasonally adjusted 402,000—the first time in a month that the numbers have settled above the 400k mark. But it’s too soon to argue that the labor market is headed for a reversal of fortunes.
Major Asset Classes | Nov 30, 2011 | Performance Update
November was a rough month for asset returns, but it would have been a lot rougher without yesterday’s buying frenzy in the wake of the news of a coordinated central bank intervention on behalf of the eurozone. Even so, most risky assets suffered hefty losses in November, reversing a large slice of October’s rally. Hardest hit in November: emerging market stocks, which sank 6.7%. The only winner among our broadly defined list of major asset classes: Inflation-indexed Treasuries, which advanced 0.8% last month.
ADP Says Job Creation Accelerated In November
Job creation rolls on, today’s ADP Employment Report advises. The preliminary update for November shows a net gain of 206,000 private sector jobs on a seasonally adjusted basis. That’s the highest monthly advance for this series since December 2010. If there’s a recession brewing in the U.S., it’s not obvious in these numbers.
Stressed Out & Up
To say that the global economy is stressed is to state the obvious these days. The potential for implosion in one of the world’s major currencies is no trivial development. The great mystery is whether the rising stress on the system will unleash a new recession. That looks like a done deal in Europe by some accounts, although there’s still a lively debate about where the U.S. economy is headed. This much, however, is clear: the financial system is under pressure and so the threat of an economic contraction in the U.S. is higher these days. But tipping points are only obvious in hindsight, particularly during delicate periods such as the one currently blowing through the global economy.
Will October’s Economic Momentum Last?
Consumer confidence rebounded strongly in November, the Conference Board reports. David Semmens, an economist at Standard Chartered Bank, opines that “the improvement in the labor market must be offering greater comfort to consumers.” The question, of course, is whether the labor market’s “improvement” can survive the sentiment attack blowing through the global economy via the euro crisis. Today’s rise in the Conference Board’s consumer benchmark provides fresh encouragement for thinking positively, but this is still mostly guesswork until the major economic reports for November arrive. For the moment, it’s still a blank slate.
Euro Explanations
The euro crisis is a tragedy—or a farce? Whatever it is, it’s bit less so today, or one could reason by way of today’s rally in U.S. stocks. But how did we get here? Everyone has an opinion.
Tactical ETF Review: 11.28.2011
The capital markets and the global economy are caught between the rock and the hard place. Misguided policy choices in Europe and deadlocked budget negotiations in Washington are threatening to crush the meager economic growth in the developed world. The toxic environment is starting to infect emerging markets too. For contrarian investors with a long-term view, the possibilities may be looking up. But earning higher risk premiums than the crowd isn’t going to come easily. Turbulence looks like a safe bet for the near term, and perhaps longer. Everything else is open for debate as the world sorts through the mystery of how we get from here to there without (hopefully) shooting ourselves in the head. The thankless job of discounting the unknown unknowns is now job one. The blunt response is now roiling markets, as you’ll see in the following review of the major asset classes via our usual list of ETF proxies…
Book Bits For Saturday: 11.26.2011
● Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy
By Yalman Onaran
Q&A with author via PLFNews
Everyone is afraid that the world economy is about to go into a second recession. Why are we heading in that direction?
That’s because we haven’t fixed the problems that had caused the one in 2008. Leaders in the U.S. and Europe patched up the troubled spots, printed lots of money and avoided the underlying issues. Especially the banking system, which blew up to bring the world economy down a few years ago, is still fragile, too wounded to support a recovery and filled with even more risk. That’s why I call the banks zombies. They will make the next blowup more spectacular.
Playing With Fire
The only thing worse than an economy headed for a recession is an economy headed for recession with rising interest rates. That appears to be Europe’s fate, and it’s a fate that increasingly looks like a self-inflicted wound. The stakes could hardly be higher. The blowback from Europe threaten the feeble growth in the U.S., which in turn carries dire implications for the global economy, starting with China. But, hey, the political “leadership” in Germany, which in many ways is directing this horror show, doesn’t see any reason to change its plans.