The headline you’ll hear is that unemployment rates are soaring to unprecedented levels. What I always like to point out is that stocks crashed months ago, collectively factoring in just that. Stocks are a discounting mechanism. It’s more obvious today than ever, and I think this is a nice reminder.
To put things in perspective, however, here’s an awesome chart from Bill McBride over at Calculated Risk:
I encourage you to follow @calculatedrisk if you don’t already. His chart shows just how dramatic the job losses have been. Meanwhile, the Dow Jones Industrial Average was up a few hundred points after this report. Again, it wasn’t a secret. The market had already moved on to factor in events that are months, quarters and even years into the future, not what happened last quarter.
But when I hear about dramatic changes in unemployment rate, in either direction, I have to think about Gold. This chart comes from @NautilusCap on Twitter, who is another fantastic follow:
We’ve already touched on Gold and Gold Miners plenty in recent months. They keep showing up on our scans of strongest groups. This has been the case since February when we first liked them from the long side again.
Here is a recent snapshot of one of our scans showing a list of industry groups where the momentum readings are actually higher than where they were when the S&P500 peaked on Feb 19th:
Here is what that other leader, Online Retail, is doing this week:
Headline: “US suffers biggest job losses in history”
Retail Stocks: “Hold my beer”
I think it’s important to recognize where the strength is and where it’s not. While Financials and Industrials continue to struggle, at a historic rate, there are winners out there.
Here is a good example of one we’ve liked over the past month $NFLX:
I think 540 is next. If we’re above 407, this remains as good way to participate in the Online Retail space.
What are you doing? Are you buying the worst performers hoping they turn around? Or are you sticking with what’s working?