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Weekly Economic and Stock Market Commentary – December 7, 2020


As for the stock market specifically:

December 7 – December started where November finished – I realize that is a simple statement of calendar fact – however/obviously I’m speaking in terms of buyers coming to the stock markets in the US and around the world.  In fact, international markets had a better week than the US.  That being said, international markets continue to lag in absolute numbers, and US markets are in no danger of losing the relative strength contest anytime soon.

“Our friends in Washington” made some movement towards another coronavirus relief package – otherwise known as telling the mint to fire up the printing presses.  This is likely to pass before the end of the year.

Expect that bill to be modest compared to bills that likely will come late in January.

We need to remember that only in Washington, DC is a spending proposal of $908 billion dollars “modest.”

Government Shutdown?

We also get to go through the regular hysteria about an imminent government shutdown.  I am sure “our friends in Washington” are practicing the preening invocations blaming the “other side” for the unmitigated gall to shut down the government right before Christmas in a pandemic.

The US markets are at record highs, and we should be happy for that.  The bad news is the metaphorical rubber band now is stretched a good bit to the overbought side.  I am not smart enough to tell you when the snapback will occur, nor am I smart enough to tell you how far in the opposite direction the rubber band will stretch.  Sorry about that.

The main risk assessing tools I use gave us a mixed bag last week.  We had one indicator higher by a full percentage point, one up a little, and one down a little.  Nothing dramatic happened in terms of the indicators, so the nature of the evidence requires me to pursue WEALTH ACCUMULATION strategies.

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

Below is where our indicators stand as of December 7, 2020 (Courtesy Dorsey, Wright, and Associates).

On a general note: 

The Department of Labor announced the US economy added 245,000 jobs in November.  The unemployment rate fell to 6.7%.  It was the seventh consecutive month of job gains.  Private sector payrolls grew, but government head counts decreased.  The article that made it to my inbox did not have an expected job gain for November.

As always, if you have questions or want to talk, email me at philip.rongo@ibexwealth.com.