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Weekly Economic and Stock Market Commentary – June 21, 2021


Weekly Economic and Stock Market Commentary – June 21, 2021

As for the stock market specifically:

Quadruple witching came and went in a ghoulish manner (I am sorry if I mixed metaphors) and the volatility that often comes during such events also arrived. The bad news is that we no longer are operating from record highs on the market averages, but the good news is that the loss the domestic market averages encountered this week came off record highs, so overall we are in pretty good shape. International markets suffered the biggest loss for the week.

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 Department of Labor provided us news regarding producer prices in May. Prices rose 0.8% in May, which is faster than the 0.6% in April. Core prices jumped 0.7%.  These monthly comparisons are significant in that they avoid the base effect of comparing prices to the pandemic lows and near lows. The price increases were across the board. Producer prices don’t necessarily correlate with consumer prices, but consumer prices rose the fastest in 13 years.

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.

Questions or want to talk about this Economic and Stock Market Commentary – June 21, 2021? Email me at philip.rongo@ibexwealth.com.