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Weekly Economic and Stock Market Commentary – February 20, 2024

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As for the stock market specifically:

It would be fun to say that the Kansas City Chiefs caused the stock market to fall last week, as that would be easy by the terms of the Super Bowl Indicator. As long-time readers know, I don’t spend much time on attribution, otherwise known as cause and effect. Nevertheless, US markets declined, and international markets gained for the week.

There was a debate among candidates to become Senator in CA last week. Normally that is not a topic for this column, but one candidate brought up an idea that displayed a tremendous degree of economic illiteracy. Two of the other 3 candidates offered a lesser version.

Back in the 1980s, someone asked me how to eliminate poverty. I suggested that the minimum wage be set to provide an annual income floor of $50,000. Of course, as a free market advocate, this was a tongue-in-cheek reply to the question.

Three of the four candidates on stage that night currently are members of the House of Representatives. They all displayed their ignorance, while the fourth candidate, who has no record in politics, said the politicians were full of nonsense.

The member of Congress who showed the least interest in reality called for a $50/hour minimum wage.

Yes, $50/hour.

She stated that is the necessary income level to live in CA.

That brings 3 thoughts to mind.

First, run for an office that confines the damage to the state of CA only. In other words, run for an office in Sacramento, not Washington.

Second, learn that no matter what level the minimum wage happens to be, it will never be enough (more in third point below). Along those lines, all employees who currently earn less than $50/hour should expect a pay increase to maintain their standard of living.

Third, come to the realization that changing the minimum wage does little more than change the economic equilibrium point for society.

With that, we saw the bullish percent indicators rise last week, even as the market average declined. What was noticeable last week was the strong movements of small company stocks, and small company growth stocks in particular. 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 16, 2024 (Courtesy Dorsey, Wright, and Associates).

On a general note:

It was inflation week for the Department of Labor. First, the Consumer Price Index rose 3.1% in January when compared to January 2023. This was higher than the anticipated 2.9% rate. Prices rose 0.3% during the month. The core rate of inflation rose 0.4% in January, which also was higher than economists anticipated. The core price change from January to January was 3.9%.

When it was time for the Producer Price Index release, we learned core prices rose 2.0% in the past year, compared to the 1.6% level anticipated by economists. Total producer prices rose 0.9% from January to January, compared to an estimate of 0.6%. The monthly gain was 0.3%, which was measured against an estimate of 0.1%. The monthly core gain was 0.5%, while the estimate was 0.1%.

The Commerce Department gave us news on housing starts. January housing starts came in a seasonally adjusted, annualized rate of 1.331 million homes. The consensus estimates of economists expected a rate of 1.460 million units.

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