April non-farm payroll data were released this morning and Wall Street jeered. According the Department of Labor the 115,000 jobs were created last month, well shy of estimates for 165,000. The unemployment rate fell to 8.1% from 8.2% in March, but only due to fewer people actually attempting to find work.
"Below 100,000 it would have given the Fed a good signal to do some more Quantitative Easing," says Simon Baker of Baker Ave Asset Management in the attached clip. "If it had blown past 200,000, you and I would be cuddling right now and everything would be great."
The only things on Wall Street that are snuggling up in reaction to this number are the bears and the tape. Stocks are lower because 115k gives our obstinate Federal Reserve tacit permission to change nothing. Four years of stimulus has left us with an economy that Baker charitably describes as "recovering but very slowly."
More of the same isn't the answer.
Still, Baker remains relatively sanguine on U.S. equities. The operative word being relatively. "Where else are going to put your money?" he asks. "Are you going to put it into the bank earning zero percent? Are you going to put it in bonds earning 2%?"
Not that you have to stay fully invested at all times. The man who told Breakout that "Buy and Hold is Dead" back in August of last year isn't backing down from the view just yet. He's still looking to raise cash until the Fed gives us something beyond the shrug-and-stimulus MO since Operation Twist was implemented last Fall.
Baker is taking some of the counter-cyclical stocks that have outperformed in 2012 off the table.
"Leave some of the higher dividend paying stocks that are going to protect you to the downside a little bit and just be a little more conservative," he advises. "Take some of the beta, take of the risk out of the portfolio at this stage."
Don't fall in love with your winners, it's an emotion that tends to end in tears for most investors. "At the end of the day they're just tickers," Baker says. If the Fed gives us more of the same, which seems likely, he sees more selling in our future.
"You could see the market go down five, six, seven percent from here and that would be the entry point."