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Weekly Economic and Stock Market Commentary – June 5, 2023


As for the stock market specifically:

The short week started off poorly for many stocks, but great for one stock whose name cannot be mentioned here. Interestingly, the week ended strongly for the market in general, and the major market indices all finished with strong gains for the week.

Well, what a surprise, “Our friends in Washington” came to an agreement on the debt “crisis.” They agreed to spend not quite as much as last year, until of course we get some new crisis – which I expect to happen once a hurricane makes landfall on the East or Gulf Coast, or a fire starts out west. At that point, the usual pile of items nobody considered important to put into the budget that are unrelated to the aforementioned annual emergencies, will become so important that the existence of humanity would be threatened without those items being part of the aid package, but to be paid with more IOUs. Watch out kids and grandkids.

As part of the debt circus, “our friends” decided to suspend the debt limit until January 1st, 2025. There is nothing in the history of government that tells me this group (or any other group in reality) will be able to come up with better ideas between now, and the end of 2024.

What that means in the cynical world in which I dwell is that “our friends” are free to spend as sober Congressmen, Senators, and Presidents while countless drunken sailors will be forced to borrow cab fare from bartenders around the world so they can get back to their ships.

Unfortunately, what passes for “news” didn’t do its job effectively either. Countless interviews allowed people of all political perspectives to run with the idea that the US would “default on our sacred obligations” if there was not a deal.

That is simply not true.

The Treasury takes in sufficient cash each month to pay the interest on the debt. By paying the interest on the debt, the nation would then NOT be in default.

The inability to pay all bills budgeted would instead require “our friends in Washington” to decide some programs are not worth the ability to reach into our pockets and withdraw our money at the point of a gun.

As it is with this deal, about 65 percent of the budget is off limits. That was something both sides agreed to do before the first negotiation.

The bullish percent risk indicators rose slightly for the week. We still have good field position, and while technically we are in near-term WEALTH PRESERVATION mode, I must add that of the six major asset classes I track, the US domestic equity has risen significantly and is now ranked as a very acceptable rank of # 2 out of 6.

Remember, X’s mean OFFENSE or wealth accumulation, while O’s mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of June 2, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor gave us great news by letting us know that the US economy added 339,000 jobs in May. Even better news was that the revisions to the February and March numbers added 100,000 jobs that were missed earlier. The unemployment rate rose to 3.7%. Average hourly wages rose 4.3%, while good, is still below the inflation rate for the May 2022 to May 2023 period examined in the report. The labor participation rate remained at 62.6%, which is below the pre-pandemic level of 63.6%.

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