Lindsey Report – January 14

This has been an incredibly snowy and cold start to winter here in Michigan with January being the snowiest month on record: I need a snow blower if this continues.  The weather also contributed to slower job growth in January with payrolls only adding 113,000 jobs on top of a weak December report, as compared to an average monthly gain of 194,000 for all of 2013 (AP).

It is possible that the slower pace of job growth could undermine expectations that economic growth will continue building momentum and accelerate this year.  However, I’m hopeful that this will NOT be the case and that hiring will accelerate in the coming months.  Fortunately, there were strong job gains in areas like construction, manufacturing and mining and drilling companies (AP).  As noted by George Burtless at the Brookings Institute, “You rarely see expansions in these industries without the economy being in fairly good shape”.

While the weather may be to blame, there have been some mixed signals recently regarding both the U.S. and overseas economies.  These mixed signals have given institutional investors an opportunity to “take some money off the table”.  After a strong equity run in 2013, it makes sense that the “big money” would sell some positions, create cash and drive values down.

As previously noted, I have been expecting some type of correction, especially since we have not experienced one in some time.  After setting an all-time-high in early January, the DOW quickly tumbled over 1150 points in a few short weeks (Reuters).  No one knows how far it might retreat, but I think this pullback is mostly profit taking and repositioning.  I don’t think it is based in economic fundamentals, as long-term fundamentals still look good.  Yet, even in strong, bull markets, it has been commonplace to see corrections of 10% or more.  While they may not make statements look good, they can be healthy, as they can help establish a base for future gains.

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual.  To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

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