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Weekly Economic and Stock Market Commentary – December 18, 2023

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Note: The US financial markets, and my office, will be closed Monday, December 25th for the obvious reason. Normal operations will resume Tuesday, December 26th.

As for the stock market specifically:

The good witch of quadruple witching brought all good investors gains last week. I know that mixed some metaphors but it is an apt description of the week.

There is going to be a change in the equilibrium point largely for oil and related products, but other products will likely be affected as well. I understand that can apply at any time, but I specifically point to a number of shipping companies deciding not to transit the Suez Canal and Red Sea due to the recent attacks on all ships in the area.

This will cause ships to sail an additional 5000 miles or so, around South Africa, to deliver their cargo. This will increase pricing and cause some delays in product availability as the equilibrium point changes.

Something good that happened in the last six weeks or so is that small and mid-sized stocks have finally gained some traction. They are up very strongly, which has broadened the rally beyond “the Magnificent 7” stocks. Small companies tend to make their moves late in December, and into January, which leads to the market phenomenon called the January Effect.

The bullish percent indicators continue to look good. If you are wondering if it is “too late,” the good news is that we are still below the 70 yard line, and we don’t simply give the ball to the other team because we are close to the end zone. I continue to recommend WEALTH ACCUMULATION for clients.

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

Below is where our indicators stand as of December 15, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor announced Consumer Prices in November rose 0.1% from October, and 3.1% from November 2022. The first item was a little higher than anticipated, while the year-over-year number was the economists’ estimate. If you didn’t eat or use energy, prices rose 0.3% from October, and 4.0% from November 2022. Both those numbers were what economists anticipated.

When it came to Producer Prices in November, there was no monthly change, and prices were up 0.9% from November 2022. Both numbers were slightly less than anticipated. Core prices did not change in the one-month period, while the one-year core rate of inflation was 2.0%. Both core price changes were below what was expected.

The Commerce Department reported November retail sales rose 0.3%. This was well above the expected decline of 0.1%. Once again, the demise of the American consumer has been greatly exaggerated. Import prices declined 0.4%. October retail sales were revised to a decline of 0.2%. On a yearly basis, retail sales rose 4.1% since November 2022.

Happy holidays and please reach out with any questions.