Daily Bullets……For May 2, 2014

·         Retirees increasing exposure to stocks……New data out today showing retirees are putting more of their assets into stocks: 67% of new contributions going to stocks vs. 56% low in March 2009.

What’s the point? Traditional market analysis holds that individual investors tend to be late in reacting to market trends, i.e. selling at the bottom, buying near the top. While the rising contributions data is a bit of a concern, as of now, we don’t believe there is enough “euphoria” among the general public that would signal an end of the bull market or a major cyclical top in the market, although we would not be surprised to see a market correction sometime this year. We advocate diversified portfolios as a way of reducing portfolio volatility. Link: http://money.msn.com/investing/post--retirement-investors-piling-into-stocks

 

·         April jobs growth acceleration……Big news of day today is the larger-than-expected jump in job growth in April, up 288,000 and much higher than expected.

What’s the point? It reinforces our expectation that the U.S. economy is accelerating and supports other recent economic data portraying a strengthening economy. The data has both positive and negative implications for the stock market. From a positive side, stronger employment growth is favorable for U.S. corporate earnings. On the negative side, it could raise investor concerns that the Federal Reserve will have to accelerate its potential tightening of monetary policy, which would probably result in a negative investor reaction. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140502&id=17570509

·         Fed signals still support accommodative policy……Despite today’s better-than-expected April jobs number, certain indicators closely watched by the Fed remain weak enough to support an extended period of continued accommodative monetary policy.

What’s the point?  The Fed’s position on interest rates has not changed with today’s job growth number. However, if the data continues to remain very strong, this position may change. We believe a change in the Fed’s position on short term interest rates would be viewed as a surprise by investors and could result in increased market volatility. Link: http://www.bloomberg.com/news/2014-05-02/yellen-labor-gauges-show-weakness-even-as-jobless-rate-plunges.html