The Markets

How do you spell higher stock market prices? J-O-B-S!

We all know that stock prices generally reflect the underlying growth of earnings, but companies cannot grow much unless consumers have jobs that allow them to spend money on stuff created and delivered by companies. So, how do we stand on the metric of job creation? Unfortunately, it's ugly.

Since the recession started in December 2007, our country has lost 5.7 million jobs, according to the Department of Labor. Economists surveyed by MarketWatch predict another 500,000 were lost in May 2009. If May does come in as projected, that would mean the number of employed Americans would be the same as it was in August 2000. In other words, we would have a net change of zero new jobs created in roughly the past nine years, according to MarketWatch.

Is it any surprise that the major U.S. stock market indexes are lower now than they were nine years ago?

When you put it in that perspective, the government;s urgency to turbo-charge the economy and generate jobs makes more sense. The presently unanswerable question is, will the medicine to fix the economy in the short-term (e.g., massive budget deficits), stunt its growth in the long term?

Reasonable people can argue bothe sides of that presently unanswerable question, but based on the recent surge in the stock market, those who think we can handle the debt seem to have the upper hand.

As I have said many times before, I believe we will continue to see a sideways market that began in 2000. This makes sector rotation more important than ever in portfolio management.