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Weekly Economic and Stock Market Commentary – November 1, 2021


Weekly Economic and Stock Market Commentary – November 1, 2021

As for the stock market specifically:

Mark Twain was wrong with his point about which months are dangerous for investment. Of course, predictions are hard – especially about the future. In reality, it was the best October since the bull market started. Once again the major market averages finished week are record levels.

Year-end is quickly approaching, and with it comes the mandated distributions of dividends and capital gains from this year of trading.

If you were not aware, traditional mutual funds are required to distribute dividends and capital gains each year to maintain their tax treatment. This is the time of the year when that occurs and will continue until year-end.

Here is an example.

Suppose a fund closed last Friday at $15.00 share, and that fund has a $5.00 capital gain distribution effective today. If there was no change in the underlying holdings at today’s close, the system will show a price of $10.00, which means you may have some shock when you look at your account.

You didn’t really lose that $5.00/share. You now have more shares. In my experience, the number of shares at the account level tends not to be updated as rapidly as the share price.

Going to our example, if on Friday you had 5000 shares are $15.00/share, you had $75,000 in that fund. Well, that $5.00 difference in share price was used to purchase an additional 2500 shares. You now own 7500 shares at $10.00/share for the same value of $75,000.

The indicators were mixed last week, with one up, one down, and (no, not one left on base) one unchanged. I will leave the split recommendation of WEALTH ACCUMULATION for the NYSE, and WEALTH PRESERVATION for the OTC.

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

Below is where our indicators stand as of October 29, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Commerce released the first report of 3rd quarter Gross Domestic Product. They said the economy grew at an annualized rate of 2.0%. The report attributed the slower growth than the prior four reports to the delta mutation of the coronavirus, and the new scapegoat for all things economically evil – the supply chain break. Consumer spending rose 1.6% during the quarter, compared to 12% during the second quarter. Another line in the report showed that inventory provided 2.1% to the number. In English, inventory moves provided much of the positive movement in the quarter.

The Federal Reserve produced reports concerning inflation and wages during the 3rd quarter. They told us prices are rising at the fastest rates in 30 years, and wages are growing at the best rates in 20 years. The inflation indicator rose 4.4% in September compared to September 2020, and 0.3% compared to August 2021. Wages rose 4.2% in the past year.

As always, contact me with any questions about the Weekly Economic and Stock Market Commentary – November 1, 2021.