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Weekly Economic and Stock Market Commentary: October 18, 2021


Weekly Economic and Stock Market Commentary October 18, 2021


As for the stock market specifically:

The stock market ignored news of higher inflation (perhaps not “transitory”) and had a strong week. Thursday was a great day, and Friday’s follow-up was pretty good too.

The markets also saw good movement after good earnings reports by some major companies.

As long-term readers know, I don’t put much emphasis on earnings as a driver of stock prices, but last week they moved together.

Stocks continued to gain from the buy signals about which I wrote last week.

Markets also shrugged off continuing news about shortages in multiple products, along with higher prices, and workforce shortages in many sectors across the country. We can have debates over the chicken vs. egg of which came first, but the fact is we have seen the signs in the store about limited product availability as well as the countless help wanted signs.

The bullish percent indicators all had a good week. Each gained more than 2 percentage points. This movement did provide the impetus to put together a “shopping list” over the weekend. Despite the good news, the nature of the indicators requires us to state we are in WEALTH PRESERVATION mode. Transition points are sometimes difficult as pending the indicator, it may be faster or slower moving than some other indicator. By this, I mean that the Bullish Percent of the S&P 500 did flip back to X’s, or positive as did a number of faster moving indicators. Let’s hope it’s just a sign of good things yet to come.

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

Below is where our indicators stand as of October 15, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor gave us the news about inflation during September last week. Overall, Consumer prices rose at 5.4% from September 2020, up from the 5.3% rate measured from August to August. The core level of inflation for the year ending in September was 4.0%, which is unchanged since August. The inflation rate exceeded the income growth in the past year. Earlier this year I wrote about large changes in CPI due to the low base of March and April 2020. At this stage of the game, I do not consider this to be movement of a low base.

The Labor Department announced that Producer Prices in September rose at a rate of 8.7%. This was the highest level in about 8 years.

The Commerce Department announced September retail sales rose 0.7% compared to August. That is a great number. However, I am unsure if the data reflect the impact of inflation. Automobile sales led the gains. The number of cars sold declined, but the average sales price increased. The report stated that gasoline sales rose 1.8% during the month. Once again, the report does not delineate and discuss the total number of gallons sold. One interesting aspect about this is that the number increased despite more electric and hybrid vehicles on the road.

Finally, the Social Security Administration gave a good news/bad news announcement. They announced the 2022 Cost of Living Adjustment will be 5.9%, which is the highest in a number of years. The bad news (not in the report) is that CPI is taking 5.3% of that. Another part of the bad news is that will deplete the trust fund sooner than announced.

Please call me with any questions and I hope you find value in the Weekly Economic and Stock Market Commentary October 18, 2021.