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The U.S. labor market is getting better, much better, according to a Labor market report published Friday morning - the U.S. economy created 195,000 in June, beating analyst expectations by a big margin.

Friday's report comes on the hills of another strong payroll report in May, both pointing to an improving labor market, with most of the job gains coming in the private sector of the economy. That's certainly good news for corporate profits, and that could explain the big jump in all major stock indices. But not for U.S. Treasury bonds and precious metals, 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. What should investors do?

Major Equity Indexes



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Powershares QQQ Trust (NASDAQ:QQQ)




SPDR Dow Jones Industrial Average (NYSEARCA:DIA)




Major Precious Metals ETFs/Stocks Last Week


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like iShares Silver Trust (NYSEARCA:SLV)




Freeport-McMoRan Copper and Gold (NYSE:FCX)




1. Stay away from precious metals that are QE sensitive, but don't short them, as the market may have already discounted the worst scenario. Aggressive investors may want to trade them on the long side a ay consider trading them on the long side.

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. (NYSE:CIEN), JDS Uniphase Corp. (NASDAQ:JDSU), Corning, Inc. (NYSE:GLW), and Ariba Inc. (NASDAQ:ARBA). Now the theme is social media and web-based companies, like Netflix, Inc. (NASDAQ:NFLX), OpenTable 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 cyclical stocks that may benefit from the two strong employment reports. I particularly like Ford (NYSE:F), as I discussed in a previous piece.

6. Buy portfolio protection, using puts on SDR S&P 500 or calls on iPath S&P 500 VIX ST Futures (NYSEARCA:VXX).

7. Stay away from high dividend stocks, which have been trading like bonds--higher Treasury yields will make these stocks less appealing.

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

Source: How To Trade Another Strong Labor Market Report