The lower than expected non-farm payroll number sent stocks see-sawing before and after the opening bell. But was the bad news actually good news, or was it truly bad news?
Hugh Johnson is choosing the latter, telling Yahoo Finance, “bad news is bad news. The whole story here is primarily about earnings...this bad number probably suggests that maybe the third quarter of 2014 is not going to be as strong, maybe profits aren’t going to be as good.”
Still Johnson cautions,”these numbers jump around a lot from month to month. It’s a little bit bad news because I’m very worried about profits.”
For those intent on looking for a silver lining Johnson admits that the bad news will be “moderated” by the fact that it gives Janet Yellen “some ammunition to postpone raising interest rates a little bit further.”
So what does it all mean for your portfolio? Johnson sees two important factors joining forces to suggest a correction is on the horizon:
1 - he believes the market is overvalued by about 4%
2 - he sees optimism at high and widespread levels
Johnson says such a correction typically doesn’t just bring valuations inline but prompts an undervalued market, he says to expect a correction in the 8-10% range.
Fear not, however, because Johnson also notes this is “all within the context of an ongoing bull market” and he doesn’t see that ending anytime soon.
More from Yahoo Finance:
Macke: Enjoy August profits and take some money off here
As football season kicks off, states target fantasy play
Tesla’s big gamble: Nevada wins Gigafactory