An observation

Have you noticed that when there is good news on unemployment that the financial markets soar? Have you noticed when there is bad news on unemployment the financial markets fall? While this correlation may seem obvious, there is an important implication. The news flow is mostly still about corporate profit reports, yet despite that, even bellwether firms (like Starbucks (see below)) are not moving the markets, but unemployment data is. For me the meaning is that investors are currently discounting unemployment news and that news has become the most important thing to watch for most investors. This is not surprising – I have been saying since the summer that unemployment would be the most important thing to watch. But it is clear that now folks are in agreement with that assessment. But even more importantly…

What to watch for now: Since investors are eye-balling unemployment, what will now be interesting to watch is when the market stops scrutinizing unemployment data and shifts onto something else. That something else may be retail sales in the upcoming Holiday season, it may be the health care reform movement in D.C., it may be the trajectory of commodities prices, etc. Who knows? But when investors have shifted their focus that will be important information to track as investors. I’ll be watching it.

Jason