2-25-2010

The Market May Have Forecast the Snow Storms

Jobs haven’t come back yet!  This fact is weighing heavily on the market.  Let’s review the facts and put them in perspective.  Early last fall, very few market observers expected jobs to turn positive in the first half of 2010.  In November and December, enough progress was made that expectations changed.  However, the S&P levels from the early Fall through now have changed very little.  What did the market know?

The self-sustaining recovery is in place.  The market is climbing a wall of worry.  The worries are numerous and specific, but none of them will derail the recovery.  We had substantial GDP growth in the fourth quarter and will again in the first quarter.  The real wild card, believe it or not, has been the snow!!

The jobs surveys have been done and will continue to be done against a backdrop of real dislocation of job seekers by the snow storms.  The seasonal adjustors don’t make up for this.  Thus, the month in which jobs turn, probably won’t be February; (remember, the consensus was originally for jobs to turn positive in June-September).  Most likely the numbers won’t get convincing until March or April.  

Could the market have known that the snow would delay the jobs data turning up?  Stranger things have happened.  The best weather observer I know, who trades weather related securities very successfully, was expecting a “horrendous winter” for several months.  Bob Barbera said this morning that, “after several Al Gore winters we’re finally having a normal winter that will not be properly seasonally adjusted.”  He pointed out that the last time we had a big snow storm- winter, 1996- the February and March jobs numbers underwent a wild swing from negative to positive.   Luckily snow doesn’t last all year, and neither will the disappointing jobs numbers.  

Fred S. Fraenkel
Vice Chairman and
Chairman of Investment Policy
Beacon Trust Company

Copyright (c) BEACON TRUST 2010. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. This report is issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold a company’s stock. Predictions, forecasts, estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained are proprietary to Beacon Trust. and constitute valuable intellectual property. No material from this report may be used or otherwise disseminated in any form to any person or entity, without the explicit written consent of Beacon Trust. All unauthorized reproduction or other use of material from Beacon Trust shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Beacon Trust expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Beacon Trust reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.