The employment trend is murky. On the one hand, the ADP report today said there were 217,000 private sector jobs created from January to February. This would suggest that the employment trend is improving – that further gains could follow.
On the other hand, government employment, even though it went up in the past month, is supposed to decline going forward as states begin to meet their budget shortfalls. The OTHER “other hand” is that the private employment trend could be pressured by the “energy tax” of much higher oil prices.
Oil prices were running between $65 and $86 per barrel throughout most of 2010, but since October, they’ve spiked to a range of $79.25 to current prices of over $100 per barrel (all near month futures prices). So the energy costs for all businesses are coming straight off their bottom lines due to this oil price trend and consumers feeling the pinch will spend a bit less for every dollar gas goes up, pressuring most businesses.
If stocks then readjust to lower earnings by falling in price, the “rich” will pull back on their spending as they normally do. So this trend has a very broad potential reach from “Walmart spending” to “Tiffany spending.”
The oil price trend has a huge impact on our economy, as much as say, raising taxes does, so it acts as a stock market indicator. And the oil price trend is an employment trend indicator as well. Less spending due to higher gas prices would mean fewer jobs.
The good news is that all this could change with a resolution of the current Middle East situation. In fact, oil prices could crash from their current levels hurting speculative traders hopeful for a sustained oil price trend. That could also impact the upward gold price trend as the two are very much connected.
The key is to not be reactive, but to decide how much you intend to lose before cutting back on your stock exposure. My way of teaching this is to say “Investments are not an amusement ride.”
You are not supposed to “just sit there” while you give up all that you have made over the past two years! This is why I coined the term “Passive Shorting™. See my page on how to go “passively short” here:
It is not true shorting, but it is how you can protect your gains. I am not saying to sell everything by the way. You must follow each market separately and make separate selling decisions, which is the purpose of my newsletter.
Don’t forget, tomorrow is the Federal government’s unemployment report, which could disturb the stock market if the unexpected happens on either side.
If you’ve never looked at it, you really should take a look at my SP500Tracker™ newsletter. It is out this weekend and its FREE, so please subscribe below if you are concerned about where the stock market may go from here:
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