Photo: neonquark on flickr
Yesterday’s dismal U.S. jobs number, was the rotten cherry on top of mountain of awful manufacturing data from around the world.But it could’ve been a lot worse.
In fact, Barron’s Michael Santoli think that investors in the stock market have been prepared — perhaps overprepared — for bad news as reflected by low valuations.
And compared to last year, the underlying fundamentals of the global markets and economy are much healthier. Santoli writes in this week’s print edition:
The case for avoiding last year’s fate, or worse, rests on somewhat larger fundamental cushions—and on the simple observation that traumas so fresh in mind don’t usually allow for a hazardous complacency to rebuild so quickly. Corporate earnings, total employment, retail sales, housing activity and bank lending are all significantly higher than they were a year ago, while stock-market valuations at this year’s market peak were less lofty than at the first-quarter 2011 peak. Further, there is now a new European Central Bank chairman who has shown more willingness to marshal monetary powers to head off banking collapse.
Santoli notes there’s plenty of evidence to suggest that the “de-risking” of investors’ portfolios has already occured.
One thing about this year’s market downturn is that it was preceded by a distinctly defensive tone, the majority hunkered against “expected shocks.” Even before the overall market had shed 10%, the areas that call out loudest for punishment in a growth-and-credit scare had been pummelled, with financial, commodity, emerging markets and lower-quality tech names badly underperforming.
This suggests a lot of the “de-risking” process has already unfolded, and that the merest of upbeat stimuli—with ECB policy makers meeting this week, and the Fed convening and Greece voting soon thereafter—would touch off a quicksilver rally, with the tape so oversold and the investor mood dour.
Santoli also offers a couple of stock picks to play this.