The Flinchum File

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Americans versus Investors

Last month, the ADP estimated 130 thousand jobs were created in our country during October.  Economists expected a improvement in November, with maybe as many as 170 thousand jobs being created.  Instead, ADP says 213 thousand jobs were actually created.  Economists cheered!  Americans cheered!

Investors didn’t cheer . . . in fact, Dow futures immediately dropped 25 points.  Why?

Investors expect the Fed will start cutting back on quantitative easing (QE) when the economy improves, especially when the job market improves.  If you don’t think QE is pumping up the stock market with cheap money, the stock market says you’re wrong.

Of course, the Fed knows this but expects that the “wealth effect” or good feelings generated by both the rising stock market and the continued low interest rates will encourage more risk-taking, which jump-starts the economy.

So, who are you rooting for:  America or Wall Street?  In the short-term or long-term?