Weekly Economic and Stock Market Commentary – June 21, 2021
As for the stock market specifically:
The big concern this week was due to more widespread expectations for inflation.
What I found interesting was that a few weeks ago, the worry was that growth stocks would not do well during inflationary times, while the value stocks would perform well.
The past 2 weeks gave us strong moves up (at least until Thursday) in growth stocks and small cap stocks while the value and cyclical stocks bore the brunt of the decline. So much for conventional wisdom.
The action during the past week had a deleterious impact on the risk assessing bullish percent indicators. The NYSE Bullish Percent index changed direction for the ninth time this year. While that speaks to volatility, it also was the ninth time the indicator crossed the 70% level. The Optionable bullish percent indicator also turned negative. The nature of the evidence requires a split recommendation of WEALTH ACCUMULATION for OTC stocks and WEALTH PRESERVATION for NYSE companies.
Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.
Below is where our indicators stand as of June 18, 2021 (Courtesy Dorsey, Wright, and Associates).
On a general note:
The Commerce Department announced retail sales in May dropped 1.3%. This report noted a shift in spending habits from automobiles, furniture, and building materials to services. Clothing, health, and beauty products had a good month, too.
Finally, the Federal Reserve met last week. They continued to state that the inflation rates seen over the past six months are “transitory.” The consensus is that we will have “free money” until 2023. However, St. Louis Federal Reserve banker Bullock said it may be appropriate to raise short-term interest rates in late 2022. Hold onto your hat.