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Weekly Economic and Stock Market Commentary: July 18, 2022



As for the stock market specifically:

The markets had another off week, a rather common theme thus far for 2022. Once again, the Nasdaq Composite led the way down. For those paying attention, what happened in the markets this year managed to make longer-term returns decline and even go negative for international markets.

Earnings reports started coming out last week. I don’t pay much attention to them, but a major bank had a very bad report.

During the July 4th week, the major market averages made the initial buy signals off “the bottom.” Last week provided a reversal of the buy signal on the S & P 500, but the Nasdaq Composite remained on a buy signal despite the drops.

What I did like about last week’s action was that we saw many strong drops as the market opened but managed to close on the down days reasonably close to the flat line. I view that as a positive development.

I watched a decent number of interviews with economists last week that made me question their degrees insofar as they butchered logic.

Nearly every one of them mentioned that inflation numbers were “backward-looking.”

I hate to break the news, but EVERY ECONOMIC report of facts is BACKWARD LOOKING, including the data I provide. PHEW – anyone else frustrated?!

The indicators moved higher and changed up last week. I have to say I am sorry for not updating them correctly last week. The numbers did improve since the holiday last week. WEALTH ACCUMULATION mode continues.

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

Below is where our indicators stand as of July 15, 2022 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor was busy last week. Let’s start with the report on June Consumer Prices. The year-over-year rate came in at 9.1%, which is – as you may have guessed – a 40-year high. The data collection date for this report took place as gas prices hit a record high of more than $5/gallon. Gasoline is up more than 60% since June 2021.  If you didn’t eat or use energy, prices increased 5.9% from June 2021. On a monthly basis, core prices rose 0.7% in June vs. 0.6% in May at the core level. One economist lauded the 5.1% increase in wages over the past year, neglecting the fact this means the average worker lost about 4% in purchasing power in the last 12 months. In fact, there has not been a month where average wage gains year-over-year have been higher than the year-over-year inflation rate since March 2021.

As for the Producer Price Index, June saw the 7th consecutive double-digit rise in prices compared to the previous year. June’s price increase was 11.3% compared to June 2021. The price increase from May to June was 1.1%, which would be an annualized rate of 13.2% if that continued for a year – which I do not believe it will. The good news (yes, there is some) came in two forms. First, the core rate of inflation on a monthly basis dropped to 0.3% in June, and on a yearly basis fell to 6.4%.

The Commerce Department joined in on the fun by informing us the US consumer is alive and well. June Consumer Spending rose 1.0%, with May’s numbers revised upwards. The report noted building supply stores saw their fourth consecutive month of lower sales. This number is not adjusted for inflation, so the higher sales may be from lower volume.

The Commerce Department reported retail sales in May dropped 0.3% compared to April. This was the only decline in retail sales in 2022. Low vehicle sales led the way to a lower number. The good news is that retail sales were up 8.1% from May 2021.