Economists did a good job predicting today's all-important "Jobs Report." They predicted 185-200 thousand jobs were created in the private sector during November, and the report showed . . . drum roll, please . . . 196 thousand. The futures market immediately spiked but then dropped back to exactly where it was. Actually, this is also the three month average of jobs being created, which means their prediction was actually a safe one -- the best type of predictions to make!
Unemployment dropped from 7.3% to 7.0%, compared to the Virginia unemployment rate of 5.5% and Virginia Beach of 5.3%. Earlier, the Fed said they would begin reducing monetary stimulus or QE when unemployment dropped to 6.5%.
The question is whether today's report triggers an action by the Federal Reserve to begin tapering or reducing the amount of Federal bonds they buy each month, known as quantitative easing. A strong jobs report on the tail of a very strong GDP report suggests that tapering could begin sooner. When the market believes tapering will begin soon, we can expect another "taper tantrum" like we saw last summer. Both the stock market and the bond market will then fall . . . but not too far nor too long.
Remember: the Fed will not begin tapering until it thinks the economy no longer needs the training wheels of QE, which means the economy is strong enough to grow without help from the Fed. That means the stock market should begin growing again . . . but not until after it has a taper tantrum.
It is possible that tapering will begin this month, but I don't expect that to happen before March or so. Until then, enjoy the ride and be ready to invest remaining cash during the taper tantrum.
Unemployment dropped from 7.3% to 7.0%, compared to the Virginia unemployment rate of 5.5% and Virginia Beach of 5.3%. Earlier, the Fed said they would begin reducing monetary stimulus or QE when unemployment dropped to 6.5%.
The question is whether today's report triggers an action by the Federal Reserve to begin tapering or reducing the amount of Federal bonds they buy each month, known as quantitative easing. A strong jobs report on the tail of a very strong GDP report suggests that tapering could begin sooner. When the market believes tapering will begin soon, we can expect another "taper tantrum" like we saw last summer. Both the stock market and the bond market will then fall . . . but not too far nor too long.
Remember: the Fed will not begin tapering until it thinks the economy no longer needs the training wheels of QE, which means the economy is strong enough to grow without help from the Fed. That means the stock market should begin growing again . . . but not until after it has a taper tantrum.
It is possible that tapering will begin this month, but I don't expect that to happen before March or so. Until then, enjoy the ride and be ready to invest remaining cash during the taper tantrum.
