First, let’s get the stupid out of the way. The idea that the market is bound to the fear of QE tapering should go the way of the Dodo this morning. Well, if not that extreme, it should put in doubt the notion that the market ultimately cares about QE tapering to any great degree.
- U.S. employers slowed their pace of hiring in July but the jobless rate fell anyway, mixed signals that could make the U.S. Federal Reserve more cautious about drawing down its huge economic stimulus program.
Okay, logically, if the market truly feared QE tapering, how is it that the market opened to the down side on today’s employment report. Wouldn’t the weaker than expected employment report signal to the Fed that tapering should not start in September, as is speculated now? Wouldn’t that please the market, if it ultimately cared about QE tapering? After all, the employment report carries some weight for the Fed, as it is one of the two mandates the Federal Reserve has, is it not? And, according to some in the breathless media, it carries some heavy weight for the market, as well.
- It’s the most important economic data point in the world. Financial markets will grind to a halt on Friday as the Labor Department releases the July nonfarm payroll report.
Well, the market has not exactly “ground to a halt,” but it has traded lower on the weaker-than-expected news. So, can we please put this stupid to rest and move onto another stupid?
- Italy’s supreme court on Thursday upheld a jail sentence against Silvio Berlusconi for tax fraud in a devastating blow to the four-times prime minister that could throw the country’s fragile coalition government into crisis.
It has long cracked me up that the Berlusconi dynasty has held such a grip on Italian politics, and most recently, the amusement of his trials (numbering in the dozens) mixed with his ability to ward off actually serving time for his convictions, combined with this continued high-level role in Italian politics, has provided me a genuine source of funny.
- The 76-year-old billionaire and his supporters have reacted angrily to his conviction and prison term, the first definitive sentence he has received in dozens of trials during his two decades in politics.
- Silvio Berlusconi is apparently planning a “dynastic succession” in which he would hand the leadership of his conservative party to his millionaire daughter, Marina, one of Europe’s richest and most powerful women.
- While he is unlikely to spend any time in jail due to his age, the verdict was an unprecedented blow and he could lose his seat in parliament within weeks with a vote on expelling him from the Senate likely in September.
Okay, back to the point that matters – does this latest “setback” actually mean anything to the market, you know, given all the underlying fear about Europe? Italy is, after all, the fourth largest economy in Europe. Apparently, not much, at least for the moment is the answer to my question.
- The main barometer of investor sentiment, the spread between Italian 10 year bond yields and their safer German equivalents, actually fell on Friday to 262 basis points from 270 the previous day.
Okay, enough about stupid. Here is something not stupid – more economic data that points to a market bound to go up, even if the employment report still shows a tepidly improving economy.
- Auto sales to individual U.S. consumers beat expectations in July and major automakers reported low inventories for many hot-selling models, suggesting sales would strengthen further this year.
- Factory activity jumped to a two-year high in July and first-time applications for jobless benefits hit a 5-1/2-year low last week, bolstering views economic growth would accelerate in the second half of the year.
Finally, a takeaway thought about one important characteristic successful traders and investors possess. Keep this one in mind as you plod through your working days and the market bounces around from the breathless media’s latest headline pounding.
- Flexibility is perhaps the most important characteristic to have in the business of the stock market.
Trade in the day; Invest in your life …
