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Weekly Economic and Stock Market Commentary – February 12, 2024

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Note: The US financial markets, and my office, will be closed Monday, February 19th in honor of President’s Day. Normal operations resume Tuesday, February 20th.

As for the stock market specifically:

Wall Street moved on to a fifth winning week as all three major market averages hit record highs, once again. International stocks moved up, but not enough to turn positive for the year.

We now have the answer to the final offbeat indicator for 2024. The former AFL team Kansas City Chiefs won over the NFL’s San Francisco 49ers Sunday night. That suggests this year will be a bad year for the market.

I am not in the prediction business. Nor do I use methods not grounded in financial facts for investment selection.

The research I use continues to show the market to be modestly overbought.

There is a reason why we are not more overbought. That is because the small and mid-sized companies are not participating in the rally to the extent that the few stocks carrying the load are.

The bullish percent indicators fell again last week. That came despite the gains of the market averages. The split recommendation of WEALTH ACCUMULATION for OTC stocks, and WEALTH PRESERVATION for NYSE companies continues.

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

Below is where our indicators stand as of February 9, 2024 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Institute for Supply Management released its January Non-Manufacturing Purchasing Managers Index (that’s a mouthful). It came in at 53.4, which is indicative of an expanding economy. The inflation component inside that report showed increasing prices. The amplitude of the increase was not mentioned in the report I saw.

I am not a big fan of “projections” when it comes to the stock market, the budget, or any number of thoughts. That means take these paragraphs with a big grain of salt. The Congressional Budget Office released its 10-year budget and debt projections last week. They made their calculations under the idea that the current tax code will exist for another decade – despite it expiring at the end of next year – and that there will not be a recession. Let’s help them along with crossed-fingers.

They expect that overall taxation will rise to about 17.8% of Gross Domestic Product from the current 17.3%. However, they also expect that federal government spending will increase. In other words, more debt is coming.

As always, please contact me if you have any questions or need more information.