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Weekly Economic and Stock Market Commentary: September 6, 2022



As for the stock market specifically:

No hurricanes made landfall so far this season when it comes to meteorology, but it seems one hit Wall St. last week, leading to multiple percentage point declines as we enter “peak hurricane season” on both Wall Street and on the Atlantic Ocean/Gulf of Mexico – commonly known as September. The Nasdaq Composite took the biggest hits for the week.

Two items of note, while overall they are in positive trends, each of the major market averages charts are nearing their trend lines. And second, the relative strength of stocks vs. bonds and cash is close to going back to favoring bonds and cash. I’ll keep my eyes peeled and keep you up-to-date as/if/when things change

The change in trend, coupled with changes in relative strength, would represent significant increases in stock market risk. To put it another way, it would lower the probability of successful investment results for the foreseeable future. Again, I’ll keep you informed.

With the week’s market action, the NYSE and OTC Bullish Percent Indicators went to defense. I now recommend WEALTH PRESERVATION.

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

Below is where our indicators stand as of September 2, 2022 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The Department of Labor announced the US economy added 315,000 jobs in August, which was above one group of economists’ estimate of 300,000 and below another group’s estimate of 350,000. Where is Harry Truman’s one-handed economist? I must say this is a strange recession where we add hundreds of thousands of jobs each month. Nevertheless, the unemployment rate rose to 3.7%. That is a number that is near the lows since record-keeping began. The labor participation rate rose to 62.4%. The average number of hours worked fell during August. Average hourly earnings were up 5.4% since August 2021 but well below the inflation rate.

The S & P Core Logic Case-Schiller Home Price Index for June came out last week. The national index showed a price appreciation of 18% from June 2021 to June 2022, which is a decrease from May’s 19.9% gains. The 20-city index had gains of 18.6% in June, which compares with 20.6% in May, while the 10-city index rose 17.4%, down from 19.1% in May.

Let’s talk. Email me at philip.rongo@ibexwealth.com.