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Weekly Economic and Stock Market Commentary – April 17, 2023


April 2023

As for the stock market specifically: It was a decent week with the S & P 500 and Nasdaq Composite rising modestly, while the Dow Jones Industrial Average had a strong week. International markets moved higher, too.

As readers know, I am not one to get into causation. Simply put, there are many too many factors by too many people making independent decisions that move the markets. However, I do want to point to some traditional correlations between different asset classes.

Strength in international markets tends to occur when the US dollar is weak against other currencies. The dollar tends to weaken during periods of high inflation.

We have data showing that inflationary pressures in the US started about 21 months ago. Over these months, inflation hit a series of 40-year highs while the dollar weakened. International markets, following a long period of substantial underperformance, came to life late last year.

Inflation numbers in the US economy seem to be moderating. As I stated on a few occasions, I am unsure if the inflation numbers are from actual price movement slowing, or the base effect. That is the measuring point for economic data being higher in 2022 than in 2021.

One precaution I want to give everyone is that we need to be careful about “should.” That is a predictive stance, and I prefer to remain out of the prediction business.

The bullish percent indicators moved up nicely for the NYSE and Optionable areas. The OTC bullish percent indicator moved up, but not nearly as much as the other. This continues the split recommendation of WEALTH ACCUMULATION for NYSE stocks, and WEALTH PRESERVATION for the OTC.

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

Below is where our indicators stand as of April 14, 2023 (Courtesy Dorsey, Wright, and Associates).

April 17

On a general note: The Department of Labor gave us inflation news about March last week. The Consumer Price Index rose at an annual rate of 5.0%. This was the slowest inflation rate in 2 years. Core prices rose by 5.6% compared to March 2022. In each instant, we are well above the 2% level that is supposed to be what the Federal Reserve wants to see.

Producer prices fell 0.5% in March compared to February. This was the largest decline in the number since April 2020. Overall, producer prices rose 2.9% from March 2022 to March 2023. Core producer prices rose 3.4% in the past year.

The Commerce Department reported March retail sales fell 1.0% compared to February. Consumer spending was down in nearly all areas measured. The only place where retail sales gained was in online sales. Gas stations and furniture stores bore the brunt of the decline.

The Congressional Budget Office gave us the state of the nation’s budget. This was an interesting read – if one needs a cure for insomnia. Nevertheless, the federal government outspent the nations revenue by $1.1 trillion dollars. As a comparison, the deficit at the same time in the last fiscal year was only $680 billion dollars. Spending increased 13% year-over-year, with a good chunk going to higher interest payments on the debt. Also, Social Security and Medicare payments increased sharply. Revenue fell 3%.

Revenue is correlated strongly with economic growth.

With revenues down 3%, and spending up 13%, we once again have evidence of a spending problem from our “friends in Washington.” How much pump priming is sufficient to get the system working at its full rating?

I don’t know when this comes to an end, but if we don’t slow our spending, the system at some point will collapse.

If you want more information about the commentary from this week or anything else, please contact me at 973-538-7030 and I will get it to you.