The Markets

An important key to support the stock market is starting to fall into place.

You may have guessed that key is JOBS. Last week, the Labor Department reported an increase of 227,000 new jobs in February. Over the past six months, 1.2 million new jobs have been created – the highest six-month total since 2006. More jobs could lead to more spending which could boost corporate sales, earnings, and, possibly, stock prices.

While the recent employment numbers look pretty good, leave it to Fed Chairman Ben Bernanke to rain on the parade. In testimony to Congress on February 29, he said, “Notwithstanding the better recent data, the job market remains far from normal: The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part-time for economic reasons is very high.”

On a different note, last week marked the three-year anniversary of the March 9, 2009 stock market low. Since the low:

  • The S&P 500 index has risen just over 100 percent
  • Corporate operating earnings per share have risen just under 100 percent
  • Corporate revenue per share has risen a meager 1 percent

Source: Barron’s

So, how can corporate earnings nearly double while corporate revenue barely budges? The answer… cost cutting – and a big chunk of the cost cutting came from whacking jobs. Even though we’ve added over a million jobs in the past six months, we’re still down about six million jobs from the peak, according to Barron’s.

The good news is the recent spurt in job growth may suggest that corporations have about reached the limit of cutting jobs and now have to add staff to support even small gains in revenue growth.

Data as of 3/9/12

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

   0.1%

9.0%

  5.1%

26.5%

-0.5%

1.6%

DJ Global ex US (Foreign Stocks)

-1.2

11.2

-9.7

23.0

-3.3

5.2

10-year Treasury Note (Yield Only)

2.0

N/A

3.5

2.9

4.6

5.3

Gold (per ounce)

-1.1

7.2

17.9

22.2

20.9

19.2

DJ-UBS Commodity Index

-1.6

3.3

-12.8

11.5

-2.8

4.1

DJ Equity All REIT TR Index

0.2

6.0

8.3

46.8

-1.1

10.2

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

Best regards,

Jonathan K. DeYoe

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added. This newsletter was prepared by Peak Advisor Alliance.  Peak Advisor Alliance is not affiliated with the named broker/dealer. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.  The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. You cannot invest directly in an index. Consult your financial professional before making any investment decision.