What We Want to Know is: 'How is the Job Market?'
Here's the question: Are
things really getting better or have we just settled into a malaise instead?
As far as corporate America is concerned everything certainly seems to
be looking up. We had a great 1st quarter
earnings season. Management at many
of the companies we own have been slowly moving up their earnings estimates for
the remainder of the year.
But what about the consumer? Well, retail sales are showing improvement and
consumer sentiment is slowly starting to improve. We think this is possibly due to a more positive jobs
outlook in general.
Our own view of the employment picture is as follows:
1. Stabilization. Weekly unemployment claims are moving
steadily lower.
2. We saw some hiring in the
month of April. The census hired
66,000 workers and private payrolls added 231,000 workers.
3. Temporary employment
continued to move higher (a leading indicator in the demand for jobs!)
According to Strategas
Research Partners: "On average, employment typically regains its prior peak in
about the same amount of time it took to fall from peak to trough, if not
sooner. History strongly suggests
a continued string of robust job gains from here."
However, while we do expect
to see improvement on the job front later this year, we also believe that 2011
presents some headwinds (higher taxes, costs) for corporations and small
businesses, which may dampen the rate of the job recovery.
What should you do with your
investments in this environment?
1. Review your portfolio.
Make sure you have the proper asset allocation.
2.
Maximize retirement accounts. If you are over 50, make sure to take
advantage of the catch-up provision.
This means if you are still working and have a 401k, you can contribute
$16,500 in 2010. You can add another $5,500 if you are over 50 for a total of
$22,000. This applies to other IRA
accounts as well in different amounts.
3. Make the quality trade. Make sure your portfolio includes high
quality dividend-paying stocks. On
average, these stocks have underperformed the stock market averages and
represent a good buying opportunity.
Copyright 2009, CAIM LLC
