Nonfarm Payroll Signals Major “RISK ON”.

Analysts were stunned by Friday’s October nonfarm payroll, which came in at a solid 171,000, vastly better than the 30,000-150,000 that the trading community expected. The headline unemployment rate edged up to 7.9%. 

More importantly, August and September were revised up by 84,000. It all makes the conspiracy theories offered up to explain last month’s healthy numbers look like so much claptrap. Someone was clearly smoking something, Jack.

As usual, the long-term high growth sectors of the economy brought in the best performance. Professional and business services picked up 51,000, retail gained 36,000, and health care added 31,000. Government jobs shrunk by -13,000, continuing a five-year downtrend. Over all, the private sector picked up a respectable 184,000 jobs. Taking out the seasonal adjustments, an amazing 538,000 people found work last month. There are now 12.3 million unemployed.

This data is especially important because it sets a fundamental backdrop behind several other market-friendly developments which I outlined in my black “swans” piece last week (click here for My 2012-2013 Stock Market Forecast). I list them below with some new additions:

*The 2012 election will become history tomorrow

*The fiscal cliff will imminently be resolved

*Europe is about to launch another round of quantitative easing

*There will be a big New Year reallocation push from bonds to equities

*The November-May “RISK ON” bias has kicked in

*Seasonal adjustments stretching back five years to the crash will produce a series of upside surprises in the economic data releases in coming months

*Hurricane Sandy just delivered a new stimulus package for the economy.

*The economy may actually be speeding up here in a final burst of activity before the next recession

I believe that markets will do whatever they have to do to screw the most investors. Right here, at this particular time, that means taking equities up, which almost no one owns anymore. The flock of black swans described above demonstrate why I have been substantially ramping up my risk going into the Tuesday election. I think we have a clear shot here to make some serious money going into yearend and beyond.

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