02 Dec We remain in a volatile market
The Bureau of Labor Statistics came out this morning with their estimate of new hires for the month of November, and the actual came in slightly higher than what was anticipated. Per their estimates, there were 178,000 new jobs added to the US economy. Since this number is slightly greater than the average number of workers who retire or die each month, it was a net gain overall. The big surprise came with the Unemployment Rate, which was reported to be at its lowest level since August 2008, dropping from 4.9% to 4.6%. Why the massive drop in the Unemployment Rate? It is derived from a survey that is conducted by calling 60,000 households. Survey data showed that the size of the labor force dropped by 226,000 workers. Therefore, the ratio of unemployed fell precipitously.
A deeper look at the bond market charts, primarily the 10 Year Treasury Note and the 3% Mortgage Backed Security coupon, shows that bonds are severely oversold. When a bond price falls as quickly as we have experienced following the Presidential Election, it typically indicates an extreme level of panic. Generally, once a bottom is hit, bonds tend to regain up to 50% of what was initially lost. Although that is still a sign of an overall downward trend that will continue, it can provide a brief opportunity to secure better pricing. Although not certain, we are hopeful that bonds found a bottom yesterday and will experience at least a brief rally. This is playing out nicely so far today. However, we must see if it is sustainable.
We remain in a volatile market, which comes with an increased risk of floating. Since there is no immediate need to lock, you can float for the time being. However, do so only if you can watch the markets closely.