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Weekly Economic and Stock Market Commentary – October 4, 2021

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Weekly Economic and Stock Market Commentary – October 4, 2021

Note: The US Treasury bond market will be closed Monday, October 11th. The stock market, and my office, will remain open.

As for the stock market specifically:

September is over, and good riddance. Stocks worldwide took substantial losses to end the month and the quarter. The good move up on Friday wasn’t enough to change the result for the week.

Congress went back to work last week, and did little other than bicker, and decide not to put a budget into effect for the new fiscal year until December 3rd.

It once again is time to remind everyone, in Mark Twain’s words, that “October is the worst month to invest, except for November, December, and all the other months.”

The good news is that October started off on the right foot. Now we get to see what the rest of the month has in store.

Overall, the market averages are down about 5% from the record highs of this past summer. As I stated countless times over the years, we should expect a decline of that magnitude a couple of times each year. For those on the edge, we should expect a 10% movement (top to bottom) approximately once per year.

Another interesting observation from my work over the weekend concerns the bond market.

My main bond indicator turned negative as of Friday. This indicator does not change direction often. In English, this indicator suggests higher interest rates, and lower bond prices (and lower prices in bond mutual funds).

It was another rough week for the bullish percent indicators. Each of them dropped by at least 1.9 percentage points. The nature of the evidence tells me to pursue WEALTH PRESERVATION strategies.

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

Below is where our indicators stand as of October 1, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

“Our friends in Washington” did little last week to inspire confidence in their competence. Congress was unable to agree on “critical infrastructure” and what to do with pending breaching of the debt ceiling Of course, “the other party” is at fault, no matter the affiliation of the person making the claim. I know if this show played on Broadway, it would have been shut down long ago.

The Department of Commerce reported August Consumer spending rose 0.5%. This was an increase from July’s decline of 0.1%. The report also noted income gains of 0.2% for the month.

In a related report, which was sparse on details, the Commerce Department gave its final number on 2nd quarter Gross Domestic Product. The economy grew at an annualized rate of 6.7%, which was up from 6.3% in the first quarter.

Please call me if you have any question on this week’s commentary.