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Manpower Survey Bullish, But Correction Threat Remains

We have some good news on the hiring front this morning, which aligns with our longer-term bullish outlook. However, we remain concerned short-term, and will be patient in terms of redeploying the cash we have raised in recent weeks. According to Bloomberg:

More U.S. employers said they plan to boost payrolls in the second quarter, and fewer expect to reduce headcounts, a private survey found. Manpower Inc. (MAN), the world's second-largest provider of temporary workers, said today that 16 percent plan to add workers in the April-June period, up from 14 percent in the first quarter. The share of those projecting workforce reductions fell to 6 percent from 10 percent.

The Manpower survey and the improving labor market support our strategy to maintain our current positions in energy (XLE), commodities (DBC), and precious metals (SLV, GLD). The cash we have raised recently can help us offset some of the short-term risks associated with pro-growth/inflation-friendly assets.

The CCM Bull Market Sustainability Index (BMSI) has popped back up into the low-end of an unfavorable risk-reward zone, which means we will continue to err on the defensive side until conditions improve (see table below).

S&P500 Historical Risk-Reward Profile

Little has changed relative to the table we presented March 7 titled "Patience is a virtue", which again supports a "wait and see" approach with cash. The updated table below shows some improvement over Monday morning's version, but still with a decidedly concerning slant.

Stock Market Risk Profile

From a longer-term strategy perspective, we are working on some research related to the possible impact of the looming QE2 completion date of June 30, 2011. We will present our findings and possible investment scenarios in the next day or so.


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