Weekly Economic and Stock Market Commentary October 18, 2021
As for the stock market specifically:
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 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.