This morning the U.S. Department of Labor provided more evidence of this cycle’s painfully slow recovery in employment.  The unemployment rate ticked up to 9.8% from October’s 9.6%, and the economy added only 39,000 jobs in November versus an expectation of 150,000 jobs.  Despite the disappointing employment figures, equity markets held their strong gains for the week.  The S&P 500 has rallied nearly 20% from this summer’s lows, based on the Federal Reserve’s quantitative easing program as well as improving economic fundamentals.  Although European sovereign debt woes and China’s efforts to slow its economy remain significant risks, recent stock market strength suggests the bull market should continue into 2011.

Several catalysts for higher stock prices are evident, including better economic data, extension of tax cuts, and seasonal market tendencies.  This morning’s jobs report was a bit of an outlier relative to other data indicating gradual economic improvement, including weekly unemployment claims, consumer confidence, retail sales, and the manufacturing and service sector purchasing manager indexes.  In any event, the rise in unemployment boosts the odds of a two year extension of all Bush tax cuts, and certainly means the Fed will continue pumping liquidity into the markets.  In addition, the market has tended to perform well in a mid-term election year, and the following January has been the best single month of the presidential cycle.

Disclosures

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.

There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.