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Weekly Economic and Stock Market Commentary – October 23, 2023


As for the stock market specifically:

Last week was difficult all around. In fact, it was bad enough that the Dow Jones Industrial Average fell back below the even line for the year. International markets reverted to the form they showed during the past few years and sunk to near even for the year. The S & P 500 lost more than 2 percentage points, and now we have a “normal” year – if you count normalcy to be roughly 10 stocks pulling the load. Finally, the Nasdaq Composite dropped more than 3 percentage points during the week. All in all, investors around the world were not terribly positive. Mind you, this came after a very strong start to the week.

There were some important developments last week. First, the Nasdaq Composite now is down 9.7% from its recent high. A move of another 0.3% will bring it into correction territory. The S & P 500 is down about 8.3% from its summer high. Finally, the relative strength of the Russell 2000 Small Cap Index vs. cash went in favor of cash last week.

It was a rough week for the bullish percent indicators. Then NYSE bullish percent indicator is close to going below the 30-yard line. For historical reference, we did go down below the 4-yard line in October 2008. The weight of the evidence says we continue in WEALTH PRESERVATION mode.

Remember, X’s mean OFFENSE or wealth accumulation, while O’s mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of October 20, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Congressional Budget Office announced that the budget deficit for Fiscal Year 2023 came in at $1.7 trillion dollars. Tax revenues fell $457 billion dollars when compared to the previous year. That was a drop of 9%. The drop in tax revenue came in all sectors – personal income tax, corporate income tax, and Social Security. This drop is indicative of an economy sputtering along at a low rate. If you guessed spending went up, you get a prize. Spending rose substantially in many areas, but Social Security and interest on the national debt had the largest gains. Interest on the debt now is more than the annual defense budget.

To my readers who are real estate and mortgage professionals, don’t shoot the messenger. The National Association of Realtors announced September existing home sales were a seasonally adjusted annualized rate of 3.96 million units. This was 2% slower than August, and the lowest sales rate since 2010. The median home sale price came in at $394,300. That is the highest September median sale price going back to its initial tracking in 1999. In a related note, the Mortgage Bankers Association said the week ending October 13th had its slowest activity going back to 1995.

If you want more information about a particular stock or mutual fund, please contact me.