Stocks Rise on Weak Jobs Report
Job growth weakened so stocks rose. In case you haven't figured this out already, here's why:
If jobs growth had been higher than expected, stocks probably would have fallen. Higher jobs growth would have signaled a stronger economy. A stronger economy might have caused the Fed to pause and reconsider its $85 billion per month QE program - perhaps (heaven forbid) resurrecting talk of tapering. But as expectations were 180,000 new jobs, and there were only 148,000 new jobs, the economy must be weak, so the Fed has to keep QE going at least at its current rate.
Since the stock market is fueled by this easy QE money (so current wisdom has it), it reacts happily and prices go up.
So we want the economy to remain weak if we're to have a strong stock market...Huh?
Well, that's the way things stand these days folks. What other conclusion can you reach? But in case you're concerned that this doesn't make sense, rest assured it's not you. It doesn't make sense. It's simply one of those examples of how stock market pricing can detach from reality for a stretch - sometimes a long stretch - and kind of go its own way.
So your reason hasn't failed you. In the end, if the economy stinks, stock prices won't keep rising; they'll probably fall, depending on how weak the economy turns out to be.
Just remember that when the markets are functioning as they should they do tend to sniff out the future - roughly 6 - 18 months into the future. So they may be saying that things look peachy for the time being. In that case, the market's not reacting to this news as much as it's responding to a shot of reinforcement of its long-term direction - up.
Frankly, it's best to stay out of the short-term pronouncements and interpretations. They're really not important, and just serve up a lot of noise that distracts the mind from achieving any level of true understanding.
As for the long-term direction of the stock market, so far all indicators are go. Any concerns people have - and there are legitimate concerns - are based on the current value of the stock market, historically high, if you use, for example, Robert Shiller's CAPE index to gauge the market's value. But historically high markets can go on for a good while - until they don't. So if you do understand current values and have concerns, you're probably thinking clearly, using your reason as you should. Just don't expect the stock market to follow along in lock step with your clear thinking. It's not always a rational beast in the shorter term.
If jobs growth had been higher than expected, stocks probably would have fallen. Higher jobs growth would have signaled a stronger economy. A stronger economy might have caused the Fed to pause and reconsider its $85 billion per month QE program - perhaps (heaven forbid) resurrecting talk of tapering. But as expectations were 180,000 new jobs, and there were only 148,000 new jobs, the economy must be weak, so the Fed has to keep QE going at least at its current rate.
Since the stock market is fueled by this easy QE money (so current wisdom has it), it reacts happily and prices go up.
So we want the economy to remain weak if we're to have a strong stock market...Huh?
Well, that's the way things stand these days folks. What other conclusion can you reach? But in case you're concerned that this doesn't make sense, rest assured it's not you. It doesn't make sense. It's simply one of those examples of how stock market pricing can detach from reality for a stretch - sometimes a long stretch - and kind of go its own way.
So your reason hasn't failed you. In the end, if the economy stinks, stock prices won't keep rising; they'll probably fall, depending on how weak the economy turns out to be.
Just remember that when the markets are functioning as they should they do tend to sniff out the future - roughly 6 - 18 months into the future. So they may be saying that things look peachy for the time being. In that case, the market's not reacting to this news as much as it's responding to a shot of reinforcement of its long-term direction - up.
Frankly, it's best to stay out of the short-term pronouncements and interpretations. They're really not important, and just serve up a lot of noise that distracts the mind from achieving any level of true understanding.
As for the long-term direction of the stock market, so far all indicators are go. Any concerns people have - and there are legitimate concerns - are based on the current value of the stock market, historically high, if you use, for example, Robert Shiller's CAPE index to gauge the market's value. But historically high markets can go on for a good while - until they don't. So if you do understand current values and have concerns, you're probably thinking clearly, using your reason as you should. Just don't expect the stock market to follow along in lock step with your clear thinking. It's not always a rational beast in the shorter term.
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