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business newsJobs Report Not a Shocker -- Bullishness Persists
Markets have been sensing jobs would begin to surprise positively for some time now, providing another reason to believe in the Winter Resolution.
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--Vince Lombardi
I was on CNBC yesterday doing a segment on markets and I stressed the idea that 2012 could end up being a year of significant reflation similar to 2003 and 2009 (the segment can be viewed here). I mention the clip to add some additional color to this article. In addition, I wrote a lengthy piece looking at some key intermarket relationships which Marc Faber of the Gloom Boom and Doom Report published earlier this week, and yet skeptics remain everywhere about the rally. The Winter Resolution is playing out following the Summer Crash and Fall Melt-Up, with volatility and correlations dropping and an uptrend asserting itself.
While markets are “surprised” by the strong jobs report, I'm not at all. Not because I have any particular insight, but rather because of the way I look at markets and the message that is sent either consciously or subconsciously through price. With that said, I took a look at the relative performance of publicly listed staffing companies relative to the S&P 500. Take a look below at the price ratios of Manpower Group (MAN), and Robert Half (RHI) against the S&P 500 (IVV). As a reminder, a rising price ratio means the numerator/stock is outperforming (up more/down less) the denominator/IVV.
Markets have been anticipating a pickup in jobs off of steep ratio lows for some time now with staffing companies strongly outperforming broader stock markets. Why would this be happening if jobs were NOT going to recover? As I keep stressing, the conditions remain favorable for risk-assets. And so the Winter Resolution continues.
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