What happens when a historically steep 2 week stock rally meets a jobs report worse than even the skeptics expected? A sharp pullback, obviously. A better question is what investors should be doing in the face of a worsening unemployment picture and an economy that remains comatose at best?
The first thing to do is relax, says Jim Paulsen of Wells Capital Management. If that strikes you as too Pollyanna-ish, particularly in light of today's jobs data missing expectations by a full 80%, you'd be best to pause before you start hitting the "angry snark" tone in our comments section. Jim was last on Breakout on June 9th when the S&P was at 1,280 and falling. At the time, the genial Paulsen espoused a cautiously bullish view, saying the economic soft-patch would clear and stocks would bounce generally higher towards a year-end target north of 1,400 on the S&P 500.
Paulsen isn't blind. He fully acknowledges that jobs are a problem and the recovery from Great Recession has been erratic. Regardless, he says such volatility in a recovery is historically par for the course. The world would be an easier place to make forecasts if everything moved in a straight line. It doesn't. The best any market analyst can do is give you the broad trend. You can disagree with it all you'd like but over the last month and 2011 to date, unless stocks get really bad over the next few hours, Paulsen's call for a bouncy ride higher in stocks has been right thus far.
Are you diving in short on the weakness today? Buying the dip? Smarter than everyone else and want to prove it? Hey, we welcome all comers at Breakout. Drop a comment below or send an email to BreakoutCrew@yahoo.com