Focus on Job Reports

7 08 2009

CastleInternetPhotoBy Jon Castle, CFP®, ChFC®

I can’t help but roll by eyes just a bit at the media these days; turning everything into a virtual circus.  Take Squawk Box, for instance – this morning, there was the “Final Countdown” to the jobless numbers that the government was going to release this morning – preceded and followed by a virtual smorgasbord of economists and money managers talking about what the reports mean, are they going to buy or sell stocks, etc.

Ridiculous.  First of all, any economist worth his salt knows that unemployment is a lagging indicator of the economy.  As we approach a recovery (and hopefully a bull market), historically the stock market leads off – then the economy begins its recovery process – then unemployment begins to drop.  This is the cycle that has occurred in 23 of the last 23 recessions on record, and is likely what will occur this time. 

What do we think we can accomplish by trying to make investment decisions on a lagging indicator?  Don’t we invest for what we thing is going to happen – not what a lagging indicator is telling us is happening today – essentially giving us information that is only old news.  “Hey folks – people are getting laid off!!”  No kidding.  So unemployment is on the rise.  Gee… wonder what stock I should buy… I’ve got some inside news that companies are going to lay people off last quarter!


This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

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One response

19 08 2009
Nick Psaki

Well said! Chasing performance is bad enough, but chasing last quarter’s performance is simply…nuts! Oh yeah, you said that…

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