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Weekly Market Commentary

December 10, 2012

(continued)

So why has the recovery in employment been so sluggish?† One suggestion might come from an article in the Wall Street Journal, ďA Jobless Dilemma: Whatís Wrong With Fort Wayne?Ē† The article mentions that some companies have been struggling to fill job openings not because of the lack of applicants but because the applicants are lacking the skills needed for the job.† In the last two months alone the rate of unemployment for those with less than a high school education has risen to 12.2% from 11.3% while the rate among those with a bachelorís degree and higher has been falling. There is also the lack of confidence for the future among employers, many look for much higher costs ahead from federal mandates.

The news for manufacturing was not as promising as the ISM Manufacturing PMI Index fell more than expected indicating possible contraction ahead.† Manufacturing was not the only negative surprise as consumer confidence fell well below expectation to 74.5.† The enthusiasm from the elections looks to be wearing off as the fiscal cliff and tax increases start to weigh on the minds of consumers.

As the job market and manufacturing look for ways to recovery, some industries seem to be doing rather well.† The housing industry, for instance, notes advances in both prospective buyers as well as home prices.† Even the auto industry has gained strength as sales are up 14.5% over the past year and are now above 15 million annually for the first time in almost 5 years.

Our indicators have shifted, now slightly less bullish, and we have begun to trim durations where needed.† However, we have not abandoned high quality bonds as some factors still favor quality and because of their defensive characteristics.† The U.S. unemployment rate is still high, Europe is still contracting and the tensions in the Middle East are rising.† Should these factors worsen the flight to safety will make U.S. Treasury bonds even more attractive.

Trent Dysert