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Weekly Economic and Stock Market Commentary May 3, 2021

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May 3, 2021

As for the stock market specifically:

It was another week of little overall movement for the major market averages. International markets had a significant move in the wrong direction. I don’t think we are at the point where the summer doldrums arrived, but quiet weeks are always welcomed.

With the new picture on the calendar, we moved into the traditionally weak six months for the stock market. Remember “sell in May and go away”? Welcome to May.

I want to stress the word “traditionally.” Last year saw a tremendous upward movement from May through the end of October. Last year was dominated by moves of the growth stocks, while this year there has been a good contest for the title.

As for the above comment of “Sell in May, and go away,” the research I use tells me that action, for the moment, is premature.

It was a good week for the risk assessing bullish percent indicators. All of them increased by at least 2 percentage points. What happened last week with the tools increasing, while the market averages declining goes back to composition, as discussed in last week’s commentary. I continue to recommend WEALTH ACCUMULATION for investors.

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

Below is where our indicators stand as of April 30, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Commerce announced the US had an economic growth of 6.4% on an annualized basis during the 1st quarter. That report brought the US economy to within 1% of the output that was at a record level at the end of 2019. The report noted how families spent the money provided by the past and present Congresses, and the past and present Presidents. The federal government provided a large amount of money on vaccines, and aid to various businesses. I don’t know if this level of growth will continue, but I do expect more growth as people get out of various states of lockdown.

The Commerce Department also informed us that Household Income rose 21.1% in March. That was a record in one-month income changes that date back to 1959. The March stimulus payments comprised more than 93% of the income gains counted. Spending rose 4.3% during the month and was the largest month-over-month gain since last year. The Personal Savings Rate was 27.6%, which is the 2nd highest level on record.

The Federal Reserve Board met last week and again did nothing. They anticipate leaving short-term interest rates at or near zero until 2023. They described inflation reports as transitory, and not worth a change in policy.

Finally, the S & P CoreLogic Case-Schiller Home Price Index (I won’t ask anyone to attempt to say that 3 times fast, or even 1 time fast) released data as of February 2021. Home prices rose 12% in the past 12 months, which is even better than the 11.6% rise reported for the 12 months ending in January 2021. It is the highest annual growth rate from March 2005 to February 2006. The Phoenix, AZ market led the price increase race for the 21st consecutive month.

In a related report, the Commerce Department (they must be looking for a raise) reported the homeownership rate at the end of March came in at 65.6%, which is up from March 2020, and down from 65.8% in December 2020.

Want to talk about your investments? Email me at philip.rongo@ibexwealth.com.