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Weekly Economic and Stock Market Commentary – January 8, 2024

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Note: The US financial markets, and my office, will be closed Monday, January 15th, in commemoration of the Martin Luther King, Jr. holiday. Normal operations resume Tuesday, January 16th.

As for the stock market specifically:

We know the first version of the January barometer cast its vote for the remainder of the year, and today the second of the 3 versions of the January barometer will render its verdict. Let’s just say that it leans the same way as the Day 1 version. Of course, later this month I will get into the offbeat indicators that I enjoy relaying very much.

We know I am not a big fan of the “the reason why something happened” game, especially when the explanation comes from a television or radio show.

That said, I will pass along something that may make sense but is not necessarily true.

The selling last week came because people wanted to wait until the new year before taking capital gains. The normal routine is to offset capital gains with capital losses. Most investors do this each December. I undertake the tax-loss harvesting strategy seriously, and take them throughout the year, in case you were curious.

The good news is that last week’s losses had almost zero impact on my research.

At this point I am supposed to tell you the bad news. The bad news is that markets fell over the first 4 trading days of the year.

Time will tell if the movement last week is the end of the great market we’ve enjoyed since late October, or the pause that refreshes.

The bullish percent indicators declined last week, but they are not close to reversing my recommendation of WEALTH ACCUMULATION strategies at this point. As usual, that could change by the time you see this in your inbox.

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

Below is where our indicators stand as of January 5, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The big news of the week came from the Department of Labor, which announced the employment figures from December. During the month, the economy added 216,000 jobs. New government jobs led the gains. The bad news was that estimates for October and November saw revisions downward by 71,000 jobs. The unemployment rate remained at 3.7%. Average hourly earnings rose 0.4%, which means they finally grew faster than inflation. For the second time in six months, we saw an anomaly that found total employment decreased by 683,000 from November despite many new jobs being created. The labor participation rate fell to 62.5%, which was a decline of 0.3% from November. In English, people are leaving the workforce.

The S & P Core-Logic Case-Shiller 20 City Home Price Index for October came out last week. It showed home prices rose 4.9% year-over-year, and 0.6% from September 2023. In a related story, the Commerce Department told us that November 2023 housing starts came in at a seasonally adjusted annualized rate of 1.56 million units. New single-family home sales for November saw a sales pace of 590,000 units, which is a decline of 12.2% from October 2023.

If you want more information or have any questions, please contact me.