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S&P Chief Investment Strategist Sam Stovall and Wells Fargo Chief Economist John Silvia on the outlook for the markets and economy and the impact ...
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Sudden weakening today -- for more on this morning's disappointing jobs report.
John -- -- our economy is on a tight rope right now Sam Stovall considers himself a market bowl but with a lower case -- three he'll explain that.
And -- bonds as the political reaction in Washington -- sold -- lets us Sylvia.
Wells Fargo chief economist let's start with view -- -- you make of these numbers would say it's all full autumn or not as bad as you thought.
Well.
And then not awful I think it does keep us on a tight probably keeps the Fed on the -- about fighting with a market is having to -- yes we have -- What is the pace of that -- couldn't -- Blake.
Not as strong as maybe some people had expected -- the last few months of good job gains but still it's well nonetheless and for the Fed.
It was a lot of discussion about while we don't really need QE2 anymore the -- and it's not a cent okay.
That's got I would only QE3 anymore that's undergone an -- quite QE3 back on the table so I think above the market and the Fed it's not like -- is very fine line.
And then that's partly why the dollar settle -- They believe there's more QE quantitative easing -- dollar negative -- -- Sam Stovall chief investment strategist at S&P to the conversation at stamp.
I was laughing at this you say that the market come react to these numbers on Monday in one of two ways what's -- -- doubt about that I mean what are you talking about.
Well -- maybe second or third -- and there to -- -- No my belief is that out obviously based on the futures or we're gonna be seen the market go lower our belief is that we could see the S&P.
And up bottoming from this pull back we don't think it's gonna be a correction.
Between thirteen 5013 75 which would be really only -- three to 5% decline and then as John just mentioned that people are gonna start talking about QE3 all over again.
And that could actually barred from the staging these things won't be so back.
And -- we probably end up seeing a pop in gold prices as well as a result but it early in the week I too believe.
That we're gonna continue to see this digestion could head back in the overall market.
John you say QE3 coming back on the table at least that's in the belief now -- his back -- daily doesn't it do we need another round of quantitative easing.
While from the Fed's point -- I think the answer probably gonna be asked not because I think what Bernanke is trying to achieve you know what is -- wanna get done.
And he wants half faster economic growth and he definitely wants that unemployment rate down.
The Fed has a dual mandate you know inflation unemployment at this point in time.
It seems like he's really emphasizing unemployment so when I look at what the Fed will -- More than likely given this number and perhaps one or two others like get.
The federal do -- -- right.
And again that's why these markets have -- so.
Happy if they had they love this drug they've loved when the Fed -- a bunch of money and so Sam.
How do you beat the S&P BS and he's doing pretty darn well.
While it is sort of challenging at this point we are seeing that these cyclical sectors -- the ones that are performing the best.
But I would also then say the let's look about what's gonna happen over the next couple of months.
I don't really think that the economy is going to be slowing based on the most recent.
Employment data rather I think that possibly because of the warm weather that January and February borrowed from -- yeah.
Data and then if you also think about the seasonality.
Adjustments we might find that because of the warmer weather.
Things ended up being more favorably impacted by the adjustments that might be unwound.
In the next couple of reports.
-- we got the earnings season kicking off again next week for Q1 but so.
Jon I wanted to bring up Europe to use our way enough.
Is this a -- concerned -- -- -- really worried we know that Greece certainly cause a lot of headlines for perhaps a reality wasn't going to be that a huge impact.
But Spain is a different story.
While Spain is a very large economy.
It has a little bit of a stronger trade relationship with the United States.
And I think that overall it's a big a problem for the European Central Bank but I think.
They.
People in Europe the -- -- they've process in place to deal with these issues.
And -- have to deal with them on the table.
So I think Europe continues to be a negative into the US exports and earnings for US companies in Europe.
We're we particularly -- -- -- -- recession right now but overall I think Dan they have a method in place to deal with these issues.
Sam and following what John has just outlined how should investors structure their portfolios you don't want to make massive changes just due to one number are.
One worry out of Spain but is there an allocation that you think works best right now.
Well I think if you did want to go along with the seasonal factors we are well aware of the old saying of sell in May and go away.
I don't think you should go away because I think the price performance in the market is much better than you would get in the money markets.
But I have found actually that by gravitating toward the more defensive areas.
Of health care and Staples.
In the may through October period that you can add 400 basis points your overall annual.
Performance vs the market itself going back to 1990.
Of course remember that past performance.
No guarantee of future results.
John let me ask you this kind of just wrapped up on this side of things is that one piece of data that you watched more closely even baby out and what is it.
And why and why I -- us.
Well I think at this stage -- cycle given the economic discussions today it has to be jobless claims.
I continued decline and jobless claims would suggest.
That this number is more than Langley a one off number.
By -- jobless claims out of level often -- to move higher.
That I may signal that the economy indeed has slowed down.
To a pace that's gonna disappoint a money investors.
You know what that's a good point -- good to see both of you thank you one happy holidays thank you -- -- John Silvia and Sam -- all season working.
