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Weekly Economic and Stock Market Commentary – August 28, 2023


The US financial markets, and my office, will be closed on Monday, September 4th in honor of Labor Day. Normal operations resume Tuesday, September 5th.

As for the stock market specifically:

Last week saw buyers come back, and three of the four markets in the table above had gains. The gains were substantial, too. That is good news for everyone except those investors whose portfolios are largely comprised of the Dow Jones Industrial Average components.

It’s too soon to know if the tech decline of August is done, but the technology stocks that were leaders earlier this year staged a good comeback last week.

We have our first hurricane of the year here on the East Coast. Watching the coverage of the storm, with the pronouncements of the pending doom, is making me long for the days of seeing Henry Kauffman on business news.

I suspect only a few old time market watchers know the reference.

For those who don’t, in the 1980s, Mr. Kauffman initially was an economist for the Federal Reserve Bank of New York, he then spent 26 years with Salomon Brothers, where he was managing director, member of the executive committee, and in charge of the firm’s four research departments. In any event, Mr. Kauffman was known to be a “perma-bear.’ For him, each bit of news was a calamity waiting to happen.

He also made predictions on the air. His predictions were so gloomy that he earned the moniker “Dr. Doom.”

We are in both the meteorological and financial hurricane season. The important thing to remember for both is to show proper respect for water flow and money flow. In neither case does that mean climbing to the top of a 4000-foot-high mountain peak, or the financial equivalent of selling all position holdings currently.

Despite the gains in the market averages last week, the bullish percent indicators lost ground. The defense is on the field, but it is holding the line. We shall continue with WEALTH PRESERVATION.

Remember, X’s mean OFFENSE or wealth accumulation, while O’s mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of August 25, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

I have two items from the real estate sector this week. As always, this is not meant to pick fights with real estate or mortgage banking professionals. The National Association of Realtors announced July existing home sales were a seasonally adjusted annualized rate of 4.07 million units. That represents a decrease of 2.2% from June 2023. This was the slowest sales volume this year except for January, and the slowest July sales since 2010. The median sales price rose 1.9% from July 2022 to $406,700.

In a related note, the Mortgage Bankers Association announced that mortgage rates rose to levels not seen since 2001 last week. The 30-year fixed mortgage came in at an average rate of 7.23%. What I found interesting is that the spread between mortgage rates and the 10-year Treasury bond expanded from the traditional amount of about 1.75% to about 3%.

In English, lenders are demanding a higher inflation risk premium, and they are finding enough people willing to pay them for that expanded risk – at this time.

Please contact me if you have any questions or want more information.