This Week's Message: What Jobless Claims Say About Stocks

I've heard Neil Dutta (Renaissance Macro's head of economic research) say numerous times that if businesses are hiring he doesn't need much more to tell him that the economy's in good shape.

As you may know, January's jobs number surprised to the upside. As you may or may not know, weekly jobless claims are on a below-300k streak not seen since the 1970s. And, by the way, that does not adjust for population growth: I.e., the U.S.'s population has grown by nearly 60% since 1970,      (click any chart to enlarge)

Market Commentary: Sector, International and Risk Trends (video)

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Get Ready for the 1% One-Day Plunge!

It's been an unusually long-time since the market took a 1% one-day hit. Here's Bespoke Investment Group:

The lack of a 1% decline through Monday is notable for the fact that it has now been 80 trading days since the S&P 500 last saw a one-day decline of 1%+.

So, when the S&P sees a one-day 20+ point decline (-200ish on the Dow), we'll try and resist the temptation to blame this or that -- it is normal phenomena. What's abnormal is the fact that we've gone this long without one:

  ...the current streak represents the first 80+ trading day streak without a 1% decline since 2006, and before that you have to go back to 1995 to find the next one. 

And when it happens we won't panic (we never do anyway), for, historically-speaking, they've not -- when ending a long streak without one -- been harbingers of bad things to come:

Once the 1%+ down day finally comes and ends the streak, investors have used it as an opportunity to reload as the average one week, one month, and three month returns are better than the average for all periods since 1928. 

Quotes of the Day

Economist Arnold Kling, in The Three Languages of Politics, speaks directly to me when it comes to free market economics -- I absolutely know that I instinctively scrutinize and dispute any evidence that contradicts it. And, for whatever reason, I allow myself such luxury:

When we engage in motivated reasoning, we are like lawyers arguing a case. We muster evidence to justify or reinforce our preconceived opinions. We are open and accepting when it comes to facts or opinions that support our views, while we carefully scrutinize and dispute any evidence that appears contradictory.

When it comes to the financial markets, however, it is essential that I not wish for anything, nor argue on behalf of bulls or bears. I have to assess conditions as the market presents them, like them or not. In this regard I must heed the advice of Nassim Taleb:

The problem is that our ideas are sticky: once we produce a theory, we are not likely to change our minds—so those who delay developing their theories are better off.  When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.

Quote of the Day: History Tells How to Create a Safer World -- And -- Protectionism Owes to No Political Party

Michael Shermer, in his thought-provoking book The Believing Brain, makes the point that I've made countless times over the years herein (throughout both "liberal" and "conservative" Washington regimes):

This Week's Message: What the Market Is -- And -- The Making of an Investment Adviser

Nick, feeling the momentum from recently completing the rigorous CFP (Certified Financial Planner) curriculum, is contemplating his next academic challenge. He has determined that it'll either be the CFA (Chartered Financial Analyst [the pinnacle designation of portfolio managers]), or the CMT (Chartered Market Technician [the preeminent credential for technical analysts]).

Market Commentary: The Global Economy, Foreign Markets and a Quick Look at the Short-term Technicals (video)