On the bright side: oil prices are still low. Other than that there is not a great deal to be happy about in the equity markets. My last “hedge now” signal lit up last week, so expect some rough travel ahead.

So what is going on? The market is reacting to a number of issues. As I mentioned in an earlier post the market has been looking for an excuse to drop back some, and the world has given it plenty of excuses.

The latest bugbear is the Hungarian debt crises. Fears of contagion and an unraveling of Eastern Europe dropped the Euro to new recent lows. (As a note, this last drop puts the Euro back into the middle of its long term average.) If Hungary goes under it will be, well, mildly disturbing. While the world watches Hungary the real danger continues to reside elsewhere, particularly Spain. If the real estate bubble pops there soon then Europe is in a world of hurt and it will impact us here in the US. The RE bubble in Spain is going to collapse; the question is one of timing.

The US jobs report was disappointing. There was little private sector hiring. Most of the big number of reported new jobs were census jobs. The jobless rate dropped largely because many of those who had become encouraged and re-entered the job market were disappointed and promptly exited (though the real rate of unemployment did drop a very small amount). Weekly hours are up, as are temp workers; all good signs. The pattern of recent (1991-92 & 2001-02) recessions has been little job growth until well into the recovery. The history of big job growth early in a recovery is mostly a post-WWII phenomenon. The sad reality is that a jobless recovery is the historical pattern reasserting itself. Why did this report upset the markets so much? First, the market is looking for excuses to drop. Second, people have little sense of history.

We are still in a recovery and a double-dip still appears unlikely. This recovery, however, could be the weakest in a long time (I’m still hoping for better).

Be glad if you are not in Europe.

Jim Heitman, CPF Jim Heitman, CFP®, is a writer, speaker, Certified Financial Planning practitioner in Southern California, and the founder of Compass Financial Planning – a fee-only planning and money management firm.