No one was expecting today's blow-out employment numbers. Not only were they better than expected, they were blow-the-doors-off better. The economic pundits (guessers) were predicting a 4 million loss in jobs. Instead, we got an increase (yes, that's right... an INCREASE) in jobs of 2.5 million!
You can't blame the professional guessers for being wrong; that's just the simple result you get from calling yourself an economic analyst when you should be calling yourself a "Professional Economic Guesser"; then, when you miss so badly, you can just say, "Well... it was just a guess, anyway!"
There is zero doubt that the employment numbers were a shock and on the good side. Can it be that we are actually able to have a "V-Shaped" recovery. It looks like, to me that there are some serious accolades that should be lauded upon 'some' of our political leaders in Washington. If it were not for the fact that half of my clients are on one side of the aisle from the other, I would laud praises for today's massively good employment numbers, where they are due, but sure as I do, 'some' of my more politically-sensitive clients might take umbrage with me and I just hate creating umbrage. And, if by chance, you don't know which of our representatives to thank for this remarkable change in direction in this economy, I'll just ask you to do a little research and, respectfully suggest that you not seek the truth from the mainstream propaganda machines.
How's that for dancing around the 800 pound elephant in the room and not taking sides? That's not easy to do.
So... what's the plan?
Well, the quantitative algos have thrown a TIP ALERT as of the close today. This means the 200-day moving average of the total stock market has, finally, confirmed a bullish trend. With that in mind, my investment bias has moved from mildly bullish to full-on bullish, for this coming week.
Barring some massive change in global events this weekend, I plan to get all 4 of my models fully invested next week. We are about 40% to 60% invested, depending on the portfolio, and I plan to get us 100% invested if possible.
So, does this mean risk is off the table? Not at all. In fact, there is an argument that risk of a pull-back has increased; not decreased. But, that argument is running out of steam.
Nevertheless, I plan to be a buyer next week, but just in case the wheels do fall off, I will continue to have stops in place to protect client portfolios in case of a sudden trend reversal.
So much for the glass-half-full point of view...
Let's look at the glass-half-empty point of view...
All of this recovery money being dumped into the economic cogs of this country will have to be paid back at some point. Will that be in the form of higher taxes or inflation or something else? No one knows for sure.
And, what happens if the number of people contracting and dying from COVID-19 suddenly spikes and another shut-down ensues? It is highly likely that kind of an event could tank the market.
I am also suspect that the millions of small businesses trying to open their doors (assuming they aren't boarded up to keep the anarchists from destroying their businesses) will not be able to sustain their operations with 50% of the customers that they need to survive. I hope we do not see a rash of bankruptcies in two or three months from now.
And if we find that no vaccine is in sight or that it is years away, there is no telling how horrible an impact that will have on the market.
So, for now, we can certainly continue to hope for the best, but always planning for the worst. I am buying, come Monday, but I am setting stops at the same time.
And... one more thing... The market is now less than 4% from becoming overbought. If/when that happens, I will be looking for opportunities to take profits and go to cash.