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Weekly Economic and Stock Market Commentary – November 13, 2023

As for the stock market specifically:

It was a tough go, but all the domestic stock averages closed up for the week. It took a big rally Friday to get the Dow Jones Industrial Average over the top. International markets moved upwards, too.

As much as I like to report increases in the index values, I read a report this morning that I think would be of interest to you. As you also know, I do not/can not discuss individual stock names in this column, and what follows is in no way an endorsement to buy or sell anything at all. It is however a very interesting piece of research excerpted by Nasdaq/Dorsey Wright:

“2023 has seen many interesting challenges, including rising interest rates, a market that has been buoyed by just a few of the largest stocks in the S&P 500, and perhaps the biggest, yet relatively unspoken, challenge: the great rotation of leadership amongst sectors. More on the rotation of leadership in a moment. Through the end of October, the S&P 500 (SPX) was up more than 9% on the year; however, the S&P 500 Equal Weighted Index (SPXEWI) is down nearly 4%! In other words, the average stock in the S&P 500 has returned -4% in 2023 through the first 10 months of the year. The largest stocks in the S&P 500 have certainly not been average this year. Microsoft (MSFT) is up more than 40%, Apple (AAPL) at +31%, and NVIDIA (NVDA) at an astounding +179%… just to name a few! On the other side, there are names in the S&P 500 that have lost more than half of their value, such as Moderna (MRNA), FMC Corp (FMC), and Dollar General (DG), all with returns weaker than -50%. One common thread that holds true for the top-performing stocks this year is that they are large-cap growth stocks that lagged the market in the two years prior to 2023. For the better part of the previous two years (2021 and 2022, specifically), value-oriented sectors, like Energy, carried the baton. In fact, Energy was the best-performing sector in 2021 and 2022, following a period where it was the worst-performing sector in six of the previous seven years. Additionally, Utilities, Staples, and Healthcare were the second, third, and fourth best-performing sectors in 2022. What were the worst-performing sectors in 2022? Services, Discretionary, and Technology. Through the end of October 2023, growth has been the name of the game, with the Technology, Communication Services, and Consumer Discretionary sectors not only being the three best-performing sectors but also the only ones to outperform the S&P 500. And the worst sector so far this year? As you might have guessed, Utilities, Real Estate, and Staples — all very much value-oriented sectors.”

Hat’s off to the researchers at Nasdaq for the note above and now let’s get back to my area of expertise, the bullish percent indicators moved up last week. We continue our bifurcated condition of WEALTH ACCUMULATION for NYSE stocks, and WEALTH PRESERVATION for Nasdaq stocks.

Below is where our indicators stand as of November 10, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Internal Revenue Service made news last week. That typically is not a good thing. However, this time it was. They announced the 2024 tax brackets. These brackets have an annual adjustment for inflation. You may hear all sorts of things from the news regarding inflation. The IRS adjusted the tax brackets up by 5.4%.

As always, please contact me if you want more information or have any questions.