We are on the road today, so our comments are abbreviated. We’ll be back in force next week. That said, here’s the news of the week – and how we see it here at McAlvany Wealth Management:

Not Much Ado About … Not Much

Market activity was a complete non-event this week, up to and including Friday’s November unemployment report. The rate it presented reportedly fell 0.2% to 7.7%, and non-farm payrolls registered 146,000 jobs created. Yet, once again, when one examines the actual numbers before adjustments were made, 122,000 jobs were lost and 350,000 jobs were eliminated from the labor pool – which helps explain the “improvement” in the overall rate.

The Dow and S&P initially traded off on the report, but then began to grind higher toward the close, managing to finish on an uptick by the close on Friday. It’s not clear whether traders were responding to the headline number or the underlying weakness within the report. If we were to make an educated guess, it would be the latter. This would permit the Fed to announce further QE, perhaps as soon as the Fed’s next meeting on December 13th.

It’s worth mentioning that these thoughts continue to be shared in earnest by other central banks around the world. This week we witnessed at least three central banks intervening in markets to “arrest” chronic economic weaknesses. Specifically, they were the banks of Brazil, Australia, and China (Hong Kong).

Japanese elections, due Dec 16th, will also be telling. The favored opposition party has been openly critical of incumbent leadership, and has vowed radical steps to eradicate the deflation that has plagued the nation for over two decades.

These are obviously negative developments for economies in the long-run, but they are very constructive for inflation-protected assets. For now, though, markets remain in a listless pattern until all elements in the equation reach exaggerated proportions – as we believe they will.

Best regards,

David Burgess
VP Investment Management