On US Job Data (8 June 2009)

US job data was released last Friday. It was closely watched because massive job losses in the US was one of the concerns by investors about the state of the US economy. The report showed that non-farm payrolls had 345,000 job losses in May. This was actually far fewer than originally expected, so that’s good news. However, unemployment rose to 9.4%, which was the highest in 25 years for the US.

My take on unemployment is that it is a lagging indicator. Companies try their hardest to keep employees and only start retrenching when they have no choice. Unemployment is generally at its highest at the bottom of the recession and persists even as things improve. Also, in an economy that is mainly based on capitalism and free market, the US labor market is quite responsive to changes. While there will be bitter pills to swallow in the US from many job losses. The way I see it, people who lose their jobs don’t just sit at home and wring their hands. They will try very hard to get a new job.

While US does have some issues to sort through, I believe its citizens have the ability to stand on their own through these tough times. (Not that the US government isn’t also trying to help makes things better). The reason why my portfolio has zero US equity funds is more because of my strength of conviction in Asia than in my lack of confidence in US. If I had only one dollar to invest right now, I would place it on Asia and not US at this point because I feel that it would make me far more money invested into Asia than into US.

Its admittedly not quite in keeping to the concept of having a globally diversified portfolio. However, I feel that in comparison, having even such a portfolio that is massively underweight US equities, is still more diversified than one that has mainly just a few Singapore listed stocks.

Asian markets could go through some consolidations in coming weeks. But I expect that any downside to be limited, and I would be looking to add more if markets do correct. Corrections are healthy and expected in the current market environment. What I also find good is that there are still many bears  out there. This means that we are far from the stage where everyone is coming out to say that the coast is clear and the sky is blue.