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Economic and Stock Market Commentary – February 16, 2021


As for the stock market specifically:

February 16 – It was a good week for all the worlds’ investment markets.  In fact, international markets put a beating on the US indices last week.  This is the first time in a very long while that international markets are roughly even with US stocks.  That said, relative strength still favors the US.

The financial markets ignored “our friends in Washington” last week.  Personally, I think a good case can be found in the assertion that anything that prevents Congress from legislating more contradictions in economic activity is a good thing.

In any event, we should be happy that the trends are going our way at this time, and markets largely are increasing in value.

The movement last week turned the direction of all the bullish percent indicators to offense.  No surprise as I’d intimated this last week.  Across the board, we are in WEALTH ACCUMULATION mode.

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of February 12, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note: 

The Congressional Budget Office determined the US debt reached 100% of the country’s GDP in fiscal year 2020.  We know “our friends in Washington” spent plenty of money on coronavirus activity last year.  Federal debt grew $2.1 trillion dollars in 2020.  Federal spending was at its highest percentage of GDP since World War II.  In a related story, the federal budget deficit for the first 4 months of Fiscal Year 2021 is 90% higher than the same time during Fiscal Year 2020.  The overall deficit was $786 billion dollars.

There was a very interesting item in this report that ought to make people consider the efficacy of tax increases.

In the time period of January 31, 2020 to January 31, 2021, tax collections were down only 2.8% compared to the time frame of January 31, 2019 to January 31, 2020.

It seems very clear that tax increases do little to fix deficits when compared to the spending binges our “sober Congressmen” have.

Federal Reserve Chairman Powell gave a speech last week.  He said he expects the Federal Reserve to keep easy money in effect until at least 2023.  As much as I enjoy doing math problems, I wouldn’t like the number for the interest the government would have to pay if interest rates rose to an average of 5%.

Questions? Want to talk? Email me at philip.rongo@ibexwealth.com.