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Weekly Economic and Stock Market Commentary – May 8, 2023

Weekly Economic and Stock Market Commentary – May 8, 2023

As for the stock market specifically:

The gains that bookended the week were insufficient to give us gains for the week for two of the three domestic averages. International markets continue to do well. Overall, the DJIA finished substantially lower, the S&P 500 finished a little lower, and the Nasdaq Composite and international stocks up a bit.

Last week we discussed how the major market averages had arrived to the point where they fell back on two prior occasions. One of them went beyond that level and then turned around, while the others simply fell for the week.

I find something very interesting happening within the Nasdaq Composite. The Nasdaq is doing very well this year, while the other market averages are having sluggish years. Then I noticed the bullish percent level within the OTC is near the 30% level. At that point, curiosity took control.

What I found is that the Nasdaq Composite is having a strong year despite having approximately 2/3 of the members on sell signals. The conclusion to this thought goes back to the television series Hill Street Blues, where the precinct sergeant ended the daily roll call with the exhortation “Be careful out there.”

If the preceding paragraphs weren’t confusing enough, we had a change in the NYSE Bullish Percent. That change was to show elevated risk and put the defense on the field. We now have WEALTH PRESERVATION in effect for the NYSE and OTC.

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

Below is where our indicators stand as of May 5, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor announced the US economy added 253,000 jobs in April. This was well above the anticipated number of 180,000 jobs. The unemployment rate dropped to 3.4%, matching the lowest number dating back to 1969. Average hourly earnings rose again but that gain did not compensate for inflation. In English, the rate of inflation is outpacing the rate of earnings increases. The second bit of bad news came in the form of the revisions. The gains for February and March saw a reduction of a combined 180,000 in the revisions.

If you have been reading this column for a reasonable amount of time, you know I am often amused by “our friends in Washington.” Last week was no exception. A few years ago, it was very popular to call for a minimum wage of $15/hour. The reason for that increase was to compensate for inflation. Some jurisdictions approved said increase to $15/hour, and are in various stages of completion.

Over many years I have called for a minimum wage of $50,000 per year. However, when I called for that, I also explained that it would not improve the lives of people who earned less than that amount. It would act to change the equilibrium point for “the good life.”

Last week, one of “our friends in Washington,” called for a minimum wage of $17/hour because of inflation. We can get into the chicken-and-egg effect of inflation and the stated value of the minimum wage for eternity. However, we as a people continue to elect these “friends in Washington” who continue to make the same mistakes.

I am waiting for the day some intrepid reporter asks an elected official “What is your next ridiculous idea after this ridiculous idea fails to produce the desired result?”

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