Friday’s strong jobs report brings Fed tapering back into focus, but how much?
IndexUniverse asked three of its contributing ETF strategists to take measure of relatively strong data on Friday that showed the U.S. economy created 203,000 jobs in November, and to weigh in on how investors should position themselves.
Scott Kubie, chief investment strategist, CLS Investments, Omaha, Neb.
I think the employment report increases the probability of tapering starting in either December or January, and it really reduces the risk that it won’t taper by March. Everyone had anticipated a March taper, but clearly the data here offer the potential to move that up, and it also makes it more firm that tapering is going to begin.
And, the report shows that the economy is going to be in a position to handle tapering, without the possibility that rates going up will put undue pressure on the economy. We see the world economy strengthening; this is just another sign of that. Therefore, it makes sense to transition portfolios toward an outlook that favors higher estimates for growth this year, versus last year.
I think international equities become more attractive. I also think we’ll start to see more capital spending, which would be supportive of industrials and technology.
The other thing is that there really wasn’t that much reaction to a better-than-expected number, and that suggests the markets may have already priced in the fact that tapering is going to come fairly soon. Therefore, the numbers we saw last week aren’t really something we need to react to, because it seems the market has now moved on to other things besides tapering. We should do the same.