July 8, 2013
Friday we had a better than expected employment report. The initial reaction to the news sent stocks higher and bond prices lower (interest rates higher). This is an interesting change of character compared to recent market activity. Previously, good economic news resulted in both bonds and stocks trading lower. This was due primarily to an assumption that good news is bad news because the Federal Reserve would begin tapering stimulus sooner rather than later.
To be perfectly honest I don't care how market participants react in the minutes or even days following an employment report or Fed announcement. A strengthening economy is better for this country and our long-term investment prospects. If a friend or family member quits smoking, do we lament over their withdrawal symptoms or celebrate the positive effects on their long-term health?
Our current situation is the same. Yes, the reduction of stimulus from the Fed may cause increased volatility in the short-term, but the very fact that it is happening is the result of an economy that may finally be achieving escape velocity from our previous recession. I would rather we stand on our own two feet, even if our legs are shaky at first. Doing so will lead to long-term success even if the near-term cost is the instant gratification via Fed stimulus.
Sam DiNorma
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).