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Investors looking for good news on the U.S. economy this morning got more than they asked for: A strong payroll report that exceeded analyst expectations, and a lower unemployment, both pointing to an improving labor market-with all the job gains coming in the private sector of the economy. What is good news for Main Street may not be good for Wall Street, however, as an improving economy may put an end to the several rounds of QE that have been providing investors with plenty of cheap money to chase after all three major asset categories, stocks, bonds, and commodities.

This sort of anxiety was reflected in early action on Wall Street, where U.S. Treasuries and precious metals traded lower, while stocks traded mix. What should investors do?

Major Equity Indexes



Performance (%)*

3-Month Performance (%)

12-Month Performance (%)





Powershares QQQ Trust (NASDAQ:QQQ)




SPDR Dow Jones Industrial Average (NYSEARCA:DIA)




*10 AM

Major Precious Metals ETFs/Stocks Last Week


Five-day Performance (%)

3-Month Performance (%)

12-Month Performance (%)





like iShares Silver Trust (NYSEARCA:SLV)




Freeport-McMoRan Copper and Gold (NYSE:FCX)




1. Stay away from precious metals that have been rallying on the prospect of an infinite round of QE; and ETFs that invest in them like SPDR Gold Shares; iShares Silver Trust; Freeport McMoRan Copper and Gold; and Palladium (NYSEMKT:PAL), as discussed in a separate piece.

2. Stay Away from momentum stocks. Momentum investing is a strategy based on hype about an investment theme, a new product or a new industry that captures and captivates the investor mind -- at times when money is cheap. In the late 1990s, the theme was telecommunications and networking, with momentum funds flowing into companies like Ciena Corp. (CIEN), JDS Uniphase Corp. (JDSU), Corning, Inc. and Ariba Inc. (NASDAQ:ARBA). Now the theme is social media and web-based companies, like Netflix, Inc. (NASDAQ:NFLX), Open Table Inc. (NASDAQ:OPEN), and LinkedIn Corp. (NYSE:LNKD). Momentum investing can be very rewarding as long as it lasts. But it can result in hefty losses once it fades away, usually when liquidity dries up.

3. Stay away from U.S. Treasuries -- and Treasury ETFs like TLT. Though U.S. Treasuries are the first investment to come in mind when the economy heads into recession. This time yields are already near record low levels, so any gains from here will be limited.

4. Buy an ETF that is short on U.S. Treasuries like the ProShares UltraShort Lehman 20+ (NYSEARCA:TBT) or ProShares UltraShort Lehman 7-10 (NYSEARCA:PST). The problem for investors, however, is that both funds bet against the daily price movements of U.S. Treasuries, and therefore, they do not make good long-term bets.

5. Buy Portfolio Protection, using puts on SDR S&P 500 (SPY) or calls on iPath S&P 500 VIX ST Futures (NYSEARCA:VXX).

A few words of caution: While a Fed exit is eventually imminent, it cannot be timed. That's why investors should place these bets gradually rather at once, monitoring closely the indicators that may prompt the Fed to move in this direction like the unemployment rate.

Disclosure: I am long FCX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I'm short on GLD and NFLX.