August 16th, 2010 
Category: 
It doesn’t take a genius to assess the current situation. Reality is millions of people are unemployed and with the current hiring by private employers, it looks like it will take some time before they are absorbed back into the job market. Jobs are being lost more than created, the last employment numbers revealed 131,000 jobs lost in July. Sure the employment rate is under 10% but who are we kidding, there’s a higher unemployment out there and the number is more likely higher than 15 million!
In the shadow of unemployment, many people who are working are nervous about the state of the economy. They are socking money away, reducing their debt and generally hesitant to spend. Can you blame them? It’s called preparing for the worst. Another group of laid off people probably did find a job, a low paying one, but only to make ends meet and pay off the bills. Purchasing power of this group has sunk to very low levels. The US has lost millions of high paying quality jobs in this recession; will they ever get them back?
Companies have been warning for an uncertain outlook for the second half of 2010. It’s normal, in light of the current situation; consumer spending will be weak and won’t be adding momentum to the recovery. Add to that a troubled housing market and tight credit and there you have it, a big N for Neutral.
This week, Wal-Mart, Urban Outfitters, Home Depot, Dell, and Hewlett-Packard will be reporting. What will their outlook be for the second half of 2010? I wouldn’t be surprised if they guide into more uncertainty. Also, expect the following economic releases: building permits on Tuesday and the Unemployment claims on Thursday for the US.
Until the slowing recovery picks up steam again, the markets might remain bound ranged with an occasional fat finger here and an “oops we sold too much” there. In the end, we will recover, whether in 1 year or in 5 because following a recession we always do!
What do you think dear Reader?
My DIY stock portfolio is overweight in Canadian oil producers for a reason. I believe Oil consumption is on the path of growth for the next decade and I intend to take every advantage possible of it:
Hey Mich,
I think “we’ll” recover, but it will take some time. It won’t be in a year. So, hold onto your dependable energy, bank and lifeco stocks.
The thing I keep thinking about: what happens when our largest demographic, the “boomers” walk-out and stops working? They will have far less money to spend. We’re probably only about five years out from that happening.
Thoughts?
Mark
Totally agree with you FC, the recovery will be slow, but no matter how slow it is the important thing is avoiding a second dip.
Think of the boomers from different angles such as what if they sell their houses and buy condos? what would the impact be on real estate? Then again, i am not familiar with the financial demographics of the boomer group, maybe they will be well off given that they had access to cheap property and went through more than 1 bull market? Remains to be seen…
It will be interesting to see what the impact on asset prices will be of boomers selling off their homes and investments. It would appear to have a price deflationary impact. At the same time, all of that quantitative easing is going to be reducing the purchasing power of their dollars.
I think the combination of these factors is going to lead to a lot of disappointment down the road, not the mention the huge unfunded liabilities faced by the US government. I think we need a shift in the role that government plays in our society, and it might come anyways if young people decide that they no longer feel like paying away a sizable chunk of their paycheck toward benefits, when they might not even get their original investment back!
Kevin,
I agree with you we need a radical shift to the government’s role in society however I am afraid it will take a total collapse before this happens!
Looks like we’re going to be seeing interesting times in our days…
I’m still waiting to see the private sector produce meaningful jobs for the average person. After all, people need jobs to provide for themselves and their families… then they’ll spend again.
The market is in for some challenges in the days ahead!
Doc,
I agree with you, I am waiting for the jobs too. To be honest, i am also starting to feel uneasy with the earnings season ending. Also, September is known as a negative performer and its right around the corner.
I am confident about the fundamentals of my stocks, but i am getting the urge of selling at no loss and re-buying them at a lower average price. The problem with that is i would be market timing in which i do not believe!
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