Weekly Economic and Stock Market Commentary – August 15, 2022
As for the stock market specifically: It was another very strong week for the US investment markets. Each market index moved up multiple percentage points, and brought us back to levels last seen in late May. Let’s be happy for the gains.
Something that is surprising so far this summer is the lack of meteorological hurricanes and lack of financial hurricanes. Of course, it is about this time that we reach “peak season” each year.
I don’t remember much in terms of headlines last week. Quite frankly, it was a boring week during the month of frequent boring weeks, ahh August.
That said, boring weeks have the benefit of not having catastrophes associated with them.
The markets now find themselves in a slightly overbought condition. That does not mean it is “too late” to buy. As I explained multiple times over the years, there are two general ways for overbought conditions to resolve themselves. One way is for the sellers to come in, and push the market lower. The other way is for the market to sit tight in a trading range for a few weeks.
Something worthwhile to mention is that stocks now are back in the second strongest asset class. As a reference, US stocks fell to 4th place of 6 earlier this year. So for those of you who became worried, it was not without cause.
It was another good week for the bullish percent indicators. Each moved up at least 4 percentage points, and the NYSE and Optionable indicators approximately doubled in strength from a month ago. The indicators require me to state we are in WEALTH ACCUMULATION mode.
Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.
On a general note: The Department of Labor gave us inflation news last for July last week. Many years ago I came to detest the various forms of the phrase “Blank is the new Blank.” It struck me once again last week when the news came that there was no change in consumer prices on a monthly basis. The change on an annual basis was 8.5%, which was lower than annual change reported for June. In any event, I did see two of our elected officials bragging that inflation was ZERO percent in July. So, depending upon your perspective, 8.5% is the new zero (because the report was a comment on the prior 12 months), or the new math simply eliminates inflation calculations. The core CPI rose 0.3 percent in July, but was offset by lower energy costs.
The Labor Department also announced that Producer Prices in July rose 9.8% compared to July 2021. That was the smallest annual increase since last October. Core inflation was 5.8% compared to July 2021.
The National Association of Realtors gave us existing home sales prices for July. The trade group told us median sales price was $413,500, a gain of 14.2% compared to July 2021. The report noted that median sales prices increased in 184 out of 185 markets compared to April sales. Another interesting factoid is that prices increased more than 10% in the past year, in 80% of the group’s market areas.
Finally, the Treasury Department announced the state of our nation’s budget for July. They explained that July 2022’s deficit was 30% lower than July 2021’s deficit, and came in at $211 billion for the month. The report noted that July 2021 had significantly higher coronavirus spending that did not occur this year. July spending was down about 15%, while July’s tax collections rose 3% in the past year. The deficit for the year to date is $726 billion. Plainly stated, the U.S. has spent $726 billion dollars more than it’s income (tax revenue etc.).
In my humble opinion, please brace yourselves for not only higher taxes, but also new and creative ways to invent new ones.