The all important jobs data for the month of November was released last Friday in the U.S. Unfortunately, the data surprised to the downside. The expectations, on average, by most economists and analysts were for jobs growth of about 144,000, but the actual number reported was a far lower 39,000 jobs created.
In October there were approximately 170,000 jobs created, so the November numbers reported were definitely a step in the wrong direction. The unemployment rate in the U.S. is now sitting at a seven month high of 9.8 per cent. Are these latest jobless numbers a sign that investors should be leery of the economy and investing in the stock market?
In my opinion, the answer to the above question is no. In fact I would actually look at this negative data as an opportunity. If the worse than expected jobs numbers bring down the markets over the coming weeks, I would consider this another chance for investors that have not truly participated in the most recent rally to get into this market and take advantage of growth that is yet to come.
Investors have experienced tremendous returns from the stock market since March 2009. All the returns have come with an unemployment rate of above 9 per cent in the U.S. and above 8 per cent (for the most part) in Canada. How would the market react if we started to see some positive (sustained) employment numbers in the U.S.? My feeling is that this market would move significantly higher. Thus, instead of the unemployment numbers both here and south of the border scaring away investors from the stock market, I believe it should have the opposite effect. Individuals should look to the equity markets for opportunity, since there may not be many left before this market moves a lot higher.
Last week we also received economic reports from most of Canada’s largest banks. Like some of the recent American economic data, these reports were mixed. The National Bank and Bank of Nova Scotia had good results while CIBC, TD, and Royal Bank all missed analyst’s expectations. With the exception of National Bank, none of the banks so far have mentioned that they will increase dividends. Is this a sector investors should consider owning? My answer to that is yes. Like the overall economy, I believe it is only a matter of time before bank earnings get better and they begin to increase dividends to shareholders. When that day comes, be it the first quarter in 2011 or later, this sector of the market will get a boost because I don’t believe a dividend increase has already been factored into bank share prices. Therefore, if an investor is looking for some really good growth and income investments, I would consider Canadian banks as a possible investment on a pullback.
With all the important economic data released last week, the markets still seemed to move forward. This tells me that the environment for equity investments remains good. As long as interest rates and government policy remains accommodative, I will remain bullish on this market.
If you have any questions regarding the above article or are looking for an Investment Advisor to help you with your portfolio, please send me an email at asmall@dundeesecurities.com. I will be glad to speak with you.
Allan Small is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst. The views expressed are those of the author alone, and are not necessarily those of Dundee Securities or Metro Canada.
