I was not surprised to see the belated September nonfarm payroll come in at a miserable 148,000. It clearly shows that companies were already hunkering down with their overheads in the run-up to the recent DC slugfest. The figure had been delayed by the Washington shutdown, which froze all government data releases.
In fact, the job market is weaker than even this number suggests because it includes the one time only addition of hundreds of thousands of part time teachers who went back to work for the new school year.
I think that this will be only the first of many data releases showing that the economy completely fell off a cliff in October. I have received emails from readers all over the country supplying a treasure trove of anecdotal evidence of how bad conditions got. It sounds like business came to a complete standstill in the metro Washington DC area.
If November comes and we suddenly get a whole raft of bad October numbers at once, the talking heads who drive the short term market will go into a tizzy. They?ll predict that the bull market is over, that we are going into a long awaited recession, and that it is time to dump all your stocks. A forecast of ?Dow 3,000? will once again show its ugly face. The net net of all this will likely be a 4.7% or 8% correction in the S&P 500 of the sort I discussed yesterday.
Take the gift.
That?s when you want to jump in with both feet. Because, after the politically induced October hiccup, the economy will roar once again.
The outlook for 2014 is looking mighty damn fine. For the first time in many years, we will be looking at a global synchronized recovery, with the US, Europe, China, and Japan all delivering multi year highs in GDP growth at once. The fiscal drag emanating from falling government spending will be the lowest in years. Corporate profits everywhere will soar.
The taper, the reduction of the Federal Reserve?s $85 billion a month in bond buying, is now not slated to start until June. It may not happen at all in 2014 if the jobless rate falls insufficiently and the ruckus in Washington continues. The Fed has clearly concluded that in order to prevent the US from falling back into recession it must continue to pump money into the economy as long as the gridlock lasts.
All of this is a magic formula for higher stock prices. Many of the spectacular gains in share prices we are seeing this year are in fact a front run of next year?s best case scenario. But there will still be more to run. My guess is that we could tack on another 10% to 15% from current levels in the New Year. That takes the (SPX) as high as 2,100.
So buy the next dip with reckless abandon. And write a letter to your congressmen thanking him for being such an ?hole and creating a great entry point in this melting up bull market.
