The Week That Wasn't - Weekly Blog # 902

Mike Lipper’s Monday Morning Musings

 

"The Week That Wasn't"

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

 

 

History or Not

TWTWTW (Was the abbreviation for "That Was The Week That Was". The British had a somewhat comical review of critical news, with jibes at our doings or non-doings. In a number of ways this past week was one of increased anticipation of the steps toward smoothing out some of our problems. The most critical was a cease fire in Ukraine, which would be a step toward ending the killing in that war torn country, and would also influence global economic trends. These results were expected to lead to more sales in the US and abroad, allowing the Fed to lower interest rates.

 

At the so-called summit in Alaska the two antagonists spent three hours restating existing positions but found only some unannounced agreement on how to reach a ceasefire.

 

At the same time a collection of US central bankers met to discuss economic policy, which to most of the public was encapsulated to mean changing the short-term Federal Funds rate. The official topics to be discussed were demographics, productivity, and immigration’s impact on changing the US job market.

 

Some available data points indicate that early in the next century the US population will peak. Long-term labor productivity is largely driven by education, beginning at the earliest school and home days through the graduate levels. Education is lacking appropriate leadership and funding. In the past, immigration brought us hard-working, intelligent people, a trend that could now be reversing.

 

What is the Data saying?

The following are some data points I am reading, in no particular order:

1. This being an investment blog it is important to note that the bottom of the US stock market occurred in 1929, before depression analysis officially began. This suggests the stock market may be an early warning signal.
2. The "Taylor Rule" predicts the Fed funds rate. It states the current Fed funds rate of 4.5% should be 5%.
3. Deere reduced its revenue estimate. Farm income was in a recession before the depression, and it was one reason for passage of the Smoot-Hawley Tariff. (I believe one reason the current Fed has been reluctant to lower interest rates are the many smaller midwestern and western bank loans and the feelings of their senators. Jamie Dimon is also concerned that it is difficult to quickly take over community banks under present rules.)
4. Jerome Powell is looking at the impact of tariffs on business services excluding shelter, which appears to be rising faster than other measures of inflation. In the month of July business services rose 1.4%.
5. Over the last 3 weeks the AAII sample survey’s bearish projections have risen to 46.2% from 33.0%.
6. Each Saturday The WSJ measures the prices of 72 items. In studying the data, I have noted that the single largest gainer or decliner often results from an unusual market factor. Consequently, I look at the second biggest gainer or loser and look at the spread between the two. In the latest week S&P 500 Health Care rose +4.62% while Comex Gold sank -3.00%, a spread of 7.62% which looks normal.
7. In the week ended Thursday, the best performing mutual fund peer groups were those unpopular for most of this year. (This suggests for the moment that there is safety in unpopularity. If you are looking for the best odds, bet on a material change. All three of the small company categories: growth, core, and value show promise.

 

Working Conclusion

Beneath the surface there is a lot happening, both in the long-term (the next century) and from a trading viewpoint. One should pay attention to quiet markets.

 

 

 

Did you miss my blog last week? Click here to read.

Mike Lipper's Blog: DIFFERENT IMPLICATIONS: DATA VS. TEXT - Weekly Blog # 901

Mike Lipper's Blog: Rising Risk Focus - Weekly Blog # 900

Mike Lipper's Blog: Melt Up Not Convincing - Weekly Blog # 899

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.