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Weekly Economic and Stock Market Commentary – August 23, 2021

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Weekly Economic and Stock Market Commentary – August 23, 2021

As for the stock market specifically:

The week started off badly, and markets here and around the world did not recover, despite an admirable attempt Friday. The blame went to increased virus caseloads, Federal Reserve discussion from weeks ago, and other assorted fears.

I don’t know if those items mentioned in the opening paragraph are the true reasons for a loss of about 1% for the week. However, I do know that moves of 1% off record levels are not things to lose sleep over.

I mentioned many times over the past that when the bullish percent indicators change directions many times in a year, we tend to have a bad year. With four months remaining, that is not the case thus far this year.

I also noted multiple times that fewer stocks are supporting the higher market averages. These things tend to be dangerous.

Another item cited regularly this year is that the markets seem to rise when on defense, and give up points on offense.

As if on cue, we are having a good day after the market risk sensing bullish percent indicators turning negative last week.

In the 1980s, a musical group known as The Talking Heads released an album called “Stop Making Sense.” When it comes to investing in 2021, things aren’t making sense.

This looks like a good time to bring up another Wall Street adage.

“The market can remain irrational longer than you can stay solvent.”

It was a rough week for the bullish percent risk indicators. I don’t see a reason to make major moves at this time even though we are on defense now, and WEALTH PRESERVATION for all markets followed. (I have my reasons, but you’ll either have to trust me, or simply give me a call if your curiosity is running wild. Hint: it has to do with the largest of U.S. stocks.).

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.
Below is where our indicators stand as of August 20, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Commerce gave us July retail sales numbers. They announced that July sales figures declined 1.1% from June’s sales. Automotive sales fell 3.96% during the month, but clothing, sporting goods, and furniture stores also turned in bad numbers. Online spending declined 3.1%. The bright spot for the month was that bars and restaurants rose 1.7%. Overall, retail sales are significantly higher now than in February 2020.

The Federal Reserve released the minutes of the meeting they had in late July. The notes show that the group believes they can stop buying bonds later this year. The markets have been doing fits over the taper tantrum for some time. This seems to be more of a ploy than a strategy.

If you have any questions about this Weekly Economic and Stock Market Commentary or your portfolio, please call me. If I am unavailable at that time, please leave a message to suggest a good time to call back or an in-office consultation.