For investors, a weak jobs picture is a double-edged sword: it is bad news for demand, but it keeps the Federal Reserve engaged in supporting financial markets. While the Fed has ended quantitative easing, it will maintain the size of its balance sheet by reinvesting maturing assets. Since the US is still far from full employment, which the Fed suggests is around 5.5%, and with inflation expectations still 'well anchored', interest rates are likely to remain lower for longer. With stocks' trend still up (and not overly extended above trend) and crowd sentiment at the low end of neutral, we think the environment favors stocks, especially relative to bonds, from both tactical and strategic perspectives. From a fundamental perspective, a substantial reserve of unemployed workers helps preserve profit margins by keeping labor costs low (as long as there is a modicum of top-line growth, which the world's fiscal and monetary authorities are intent on preserving). Aided by a weak dollar, second-quarter earnings are expected to be positive and supportive not only of stocks, but of the economy as well. After all, corporate profitability is a prerequisite for hiring, even though it may not always directly translate into job growth, especially as household and government deleveraging persists amid financial repression. In other words, while 'main street' continues to struggle with technology and globalization, corporate America is thriving and prospering because of it, with government left to pick up the pieces.

David Fuller's view Corporate American multinationals do have generally strong balance sheets but they are wary of the Administration's entitlement programmes and lack of tax incentives relative to many other countries. They can invest where they see the best return. Consequently, with a presidential election less than sixteen months away, corporate America may feel that it has little incentive to commence a hiring and spending spree in the home country.