Browsing Category: "Dow Jones"
The stock market keeps going up. Its now about to hit 10,500 for the first time since early September 2008. As we continue the V-shaped recovery, there is one thing thats missing: JOBS. We’ve discussed how the only reason people still aren’t hiring is because they lack any faith in the future of the economy. Today, the Gallup tracker of whether the public believes the economy is “getting better” hit a 4 and a half month low, reaching just 31 percent saying its getting better. At the same time, the Dow Jones hit another 52 week high and just keeps on going with good fundamentals driving it on. So where’s the disparity? It all started 3 months into the recovery in mid-June when the stock market had flattened for about a month. (Below is a graph of the increase in the percent of people not saying the economy is poor [green] compared to the increase in the Dow Jones [brown]):
We are exactly 8 months in from the Dow bottom that everyone now refers to as the economic nadir of this recession and things are more convoluted than ever before, due to the worsening job situation. Today, we are building on our last look half a year into the recovery in the month of October, to give you a more time-pertinent look at the state of the economy. The economy has truly reached a critical juncture, where the question is will the indicators flat-line and stop the robust recovery, or will they continue to improve and give us a very strong, quick recovery. To answer this, the key questions must first be answered, how is the recovery holding up, will it continue, will it be jobless, and will it be widespread.
NOTE: Click on the graph to see a larger picture.
1. How is the recovery holding up? Even though the net change in payrolls continues to improve, and the Dow continues to increase, it is clear that the rate at which both of these indicators are increasing has slowed. The Dow saw a down month in October, and is only up since 10/09/09 because of the strong week that just passed. Meanwhile, other indicators are showing substantial weakening in the face of increasing impatience as consumers wait for true recovery.
We keep on seeing a myriad of economic indicators showing great signs of recovery but unemployment has not. We have tried to defend this several times claiming that unemployment is a lagging indicator (which it is) or that the job situation in this recession isnt much worse than that of others, but the fact of the matter is that the markets have seen very robust recovery while unemployment hasn’t seen any at all. Had the job situation turned around and continued to improve when unemployment rates shockingly fell from 9.5 to 9.4, this would have been the typical large recession that brings with it, tons of job losses. But after 2 or 3 months, we know that that drop in unemployment rates was solely a glitch and that unemployment rates just continue to rise. For the time being, lets look at our last graph showing that the difference between the depth of this employment situation and others is minimal at worse.
Today we take a look at index volatility levels since August of 2008, during which we were in recession but facing relatively stable markets. Tracking Volatility levels, gives us a good idea of whether the markets have generally stabilized, whether short term investing is growing of lessening and most importantly, whether the market movement is real or speculative. Below is a chart of two models for how we calculated day by day volatility and analysis follows the jump. The blue columns are all percent difference between the daily high and daily low, while the red columns are change from the closing price of the previous day. It is accompanied by a 40 day moving average to provide a better idea of when the markets were most volatile.
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