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On Straight Talk Money: The Jobs Report, Inflation and Investor Sentiment

Charles Sizemore
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I joined Peggy Tuck Friday morning on Mike Robertson’s Straight Talk Money. First on the agenda: the October jobs report.

At first glance, the numbers looked pretty good.  The economy added 214,000 jobs in October, and the unemployment rate dipped to 5.8%. But under the surface, the numbers are a lot less impressive.

The 214,000 new jobs were below the consensus estimate of 235,000…and below last month’s figure of 256,000.

The number of long-term unemployed (those jobless for 27 weeks or more) didn’t budge, and these long-term unemployed accounted for about a third of the total unemployed.  And the labor force participation rate continues to scrape along at all-time lows at 62.8%.

Bottom line: These aren’t the kind of job numbers that will push the Fed to raise rates, so we shouldn’t expect the easy money spigot to be turned off any time soon.

Next on the agenda: The American Association of Individual Investors (“AAII”) announced that optimism among regular, individual investors is at its highest level since Dec. 26, 2013, while pessimism fell to a nine-year low.

What is crazy about this is that we just had the worst market selloff in two years barely a month ago.  It didn’t take investors long to dust themselves off and put new money to work.

How should we interpret this? Historically, the AAII has been used as a contrarian indicator in the belief that the “little guy” tends to be optimistic near market tops and pessimistic near market bottoms.  It’s worth noting that the last time the AAII survey was this bullish, the following month (January of 2014) was a terrible one for the market.

Final note: Though I would tend to use the AAII sentiment survey as a contrarian indicator, I’m actually a big fan of AAII’s site.  They have several great stock screeners for the value investors out there.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

This article first appeared on Sizemore Insights as On Straight Talk Money: The Jobs Report, Inflation and Investor Sentiment

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