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Weekly Economic and Stock Market Commentary – September 20, 2021


Weekly Economic and Stock Market Commentary – September 20, 2021

As for the stock market specifically:

September continued through quadruple witching last week. The major markets closed down for the week, despite a valiant effort by the Dow Jones Industrial Average. International markets fared the worst, with news out of China that a major real estate entity there will encounter difficulty with its debt payment coming soon.

As I write this on Monday, that impact seems to be continuing. Each domestic index is down more than a percentage point, and international markets taking a beating.

Did I mention we are in September?

To get back to fun with debt, “our friends in Washington” are back at it. Congress is debating whether they should spend “only” $1.5 trillion on traditional infrastructure – roads, bridges, internet connectivity – or spend that plus an additional $3.5 trillion on additional infrastructure.

Now, both sets of numbers are supposed to be over a 10-year window. However, there are multiple new spending programs in the larger bill set to expire in 5 years.

Anyone who has experienced life in America over the past 100 years realizes that programs set to expire in a certain timeframe seem to find a way to remain. These “temporary” programs apparently develop constituencies quickly and they don’t go away.

Crazy Expenses

We still pay a tax on phone lines that was supposed to end at the conclusion of the Spanish-American War (1898). We also pay for a helium reserve, and for mohair. The helium is for military observation balloons, while the mohair is for uniforms that have not been produced since World War II.

A famous American once remarked, “The closest thing to eternal life on Earth is a temporary government program.”

This comes as our nation comes up on our national debt limit, which will come sometime in the next 45 days.

It’s time to cue up the bad histrionics by our middle school quality actors and actresses in Congress while they accuse each other of fiscal irresponsibility.

As I said many times over the years, drunken sailors spend their own money and stop when out of money.

Sober (???) Congressmen and Congresswomen keep on spending.

Let’s get to some meat regarding the stock market now that we had some fun at the expense of “our friends in Washington.”

We are within 5% of the record market highs.

As stock market investors, we should expect 5% declines a few times each year, and a 10% decline each year.

It was another week of declining values for bullish percent indicators. Each was down at least 2 percentage points. The movement last week was insufficient to change the bifurcated recommendation of WEALTH PRESERVATION for NYSE stocks, and WEALTH ACCUMULATION on the OTC side.

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

Below is where our indicators stand as of September 17, 2021 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor provided a report on inflation paid by consumers for August. Prices rose 0.3% for the month, and 5.3% on a year-over-year basis. This was down from 0.5% for the month of July, and from 5.4% on a year-over-year basis for July. The core rate of inflation on a year-over-year basis was 4.0%. Put me in the pack of people not calling inflation dead at this point. The decline of inflation was attributed to lower used car inflation. In a related story, the Labor Department and Atlanta Federal Reserve Bank noted real wages declined 0.5% in August 2021 compared to August 2020.

The Census Bureau reported average American income fell during 2020 (I won’t put a reason here). The median household income fell 2.9% in 2020 to a level of $67,500. The 2019 median household income was an inflation-adjusted record. The stimulus checks from the government aren’t included in the calculation. The poverty rate rose to 11.4%. The stimulus checks were excluded from the poverty rate calculations, also.

As always, contact me if you have any questions about the Weekly Economic and Stock Market Commentary – September 20, 2021. Email me at philip.rongo@ibexwealth.com.