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November 29 – Weekly Economic and Stock Market Commentary


November 29, 2021 – Weekly Economic and Stock Market Commentary

As for the stock market specifically:

While the bulls slept off Thanksgiving dinner Friday, the bears came out of hibernation to feast on profits. I am sure I mixed metaphors in the opening line, but I work with the material I have, and literary techniques which I try to recall.

With apologies to the many teachers I’ve had over the years, and who read my work now, English and, more specifically, literature were not my best subjects.

The US markets took losses of two to four percent last week. That loss brings us back to essentially even for November. Normally declines of that magnitude would qualify as the loser of the week. However, that (dis)honor goes to international markets which lost 5% for the week. That decline cut in half the year-to-date gains for international markets while the domestic losses changed the year-to-date returns from “fantastic” to merely “outstanding.” I am unsure if there is a specific grading scale, so don’t hold it against me if I change the terms in a future column.

It is time for me to repeat some lines I write occasionally. The major market averages are off less than 5% from record highs. I am not going to spend much time worrying about this magnitude of movement. This is something to expect two to four times each year.

The blame for Friday was the announcement of a new mutation of the coronavirus with the designation omicron.

The defense now is on the field. All the bullish percent indicators flipped last week. We now are in WEALTH PRESERVATION mode.

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

Below is where our indicators stand as of November 26, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Commerce worked hard last week by providing a couple of economic reports. The first release concerned October Durable Goods. The report noted durable goods orders fell 0.5% in October. That followed a decrease in durable goods orders in September, which was revised to a worse number than the original report. The decline was attributed to lower orders for commercial aircraft.

The Commerce Department later released data regarding household income and spending. Household income rose 0.5% in October as compared to September. Spending rose 1.3%, which was higher than the month-to-month inflation. The difference between spending and income suggests that people took from savings for their October purchases. The report showed that people raised their spending in all areas measured.

Oil Markets

We had a good example of two different economic laws last week in conjunction with the oil markets. The first was the irrefutable law of supply and demand. President Biden authorized the release of 50 million barrels of oil from the Strategic Petroleum Reserve. This was to lower prices. Then we had a lesson in the law of unintended consequences. OPEC immediately announced it will cut production to keep prices up (how do you like international/economic chess?). Some of the release of oil from the Strategic Petroleum Reserve is a sale required by the infrastructure bill that went into law earlier this month. The proceeds from that sale are supposed to provide money for solar panels.

We also had the spectacle of the Secretary of Energy continue to show little knowledge of the department she heads. She did not know how much oil the nation consumes on a daily basis.

Adding injury to insult, President Biden took steps earlier this year to shut down oil transporting pipelines, and oil drilling on certain lands.

This may need to be said, so I’ll say it: I don’t care if you are for, or against, oil, or coal, or anything else for that matter. I only want an economically viable replacement before we ditch any current resource(s).

Please call me with any questions about November 29, 2021 – Weekly Economic and Stock Market Commentary.