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Weekly Economic and Stock Market Commentary: May 31, 2022


Weekly Economic and Stock Market Commentary: May 31, 2022

As for the stock market specifically:

Apparently, eight was “enough” as the stock markets all over the world ended the losing streak of 8 weeks for the US markets. I don’t know what the number for international markets happened to be.

This week will be a short letter, but I will do my best to put something in here that is worth the few minutes to read.

The movement last week was one heck of a snapback from extreme oversold levels where the S&P was oversold by – 48%. We still are oversold on a statistical basis at – 10%, but it no longer is a crazy amount. We still have no crystal ball for tomorrow, but that goes with the territory.

It was a very strong week for the bullish percent indicators and multiple short and intermediate-term indicators. I even saw strength in positive trend numbers. I now can recommend WEALTH ACCUMULATION across the board, with the caveat being that stocks remain weaker than both bonds and cash on our relative strength calculations. Coming out of that situation takes time.

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

Below is where our indicators stand as of May 27, 2022 (Courtesy Dorsey, Wright, and Associates).

On a general note: The Department of Commerce reported April consumer spending rose 0.9% compared to March. This number is not adjusted for inflation. The increased spending came from automotive purchases and spending on services. April was the fourth consecutive month of gains in consumer spending. The bad news is that the household savings rate fell to the lowest level in 14 years.

The Commerce Department gave us a report on durable goods orders in April. Durable goods orders rose for the sixth time in seven months in April and increased 0.4% during the month. That rate was about one-half the rate of the consensus estimate of economists.


Finally, an inflation measure known as the Personal Consumption Expenditure came in at 6.3% in April, down from March’s rate of 6.6%. I am not sure how much of this is basic math going back to the measurement base or if it is a real change.

I will rewrite that last sentence in English but will need a paragraph.

Inflation numbers started their substantial rise about a year ago off pandemic-induced low levels. The numbers coming out for April 2022, and continuing for some time, will be based upon levels in 2021, so the math will look better, not necessarily the absolute value. Sorry for throwing math into what was supposed to be English.

On a brighter note: Welcome to Summer! And, contact me with any questions about my Weekly Economic and Stock Market Commentary.