Market Update for the Week of August 21st, 2023

We are offering this week’s Market Update free of charge

On August 21^st, 2022, - 1 year ago, GaneWisdom/Market Edge began its subscription service to those wishing to manage their money without the high cost of management fees while becoming proactive in the care of their money.

While most investors are advised to ‘Buy and Hold’ their investments, Gane Wisdom/Market Edge has a different approach – taking small losses if need be in order to avoid big losses. No-one can predict the stock market with 100% accuracy however by staying informed with weekly market updates as well as mid-week market alerts if warranted, the odds begin to favor the investor thereby enhancing the total return on someone’s 401K, 403B, IRA, Roth IRA, Variable Annuity or Mutual Fund.

When recalling the close of business on August 19^th, 2022 (the last trading day before our inaugural post), the Dow Jones stood at 33,706 and the S&P 500 ended the trading day at 4,228. At the close of business Friday, August 18^th, 2023, we observe the Dow at 34,500 and the S&P 500 at 4,369, + 800 points or up 2.3% on the Dow and + 141 points or +3.3% on the S&P 500 respectively. As you can read below, our average return was 3.85% for the past three months! For the previous 12 months our subscribers averaged in excess of 7%. Our strategies involve following the trend of the market, geo-political events, market indicators and a multitude of market signals.

We look forward to serving our subscribers as well as our new friends in the coming years with the same up to date analysis and advice and consider it an honor to do so…………………………….

What Happened This Week?

As a subscriber to GaneWisdom/Market Edge you are kept abreast of the yields on US Treasury Bonds and our continued concern with what is known as the ‘Inverted Yield Curve’. This happens when long-term Treasuries offer a lower yield than short-term Treasuries. Treasuries were the big story in the major indexes this past week. Specifically, the deteriorating value of the longer-duration Treasuries. The rates have climbed for a fifth straight week, and this has had a decidedly negative effect on the equity markets. The 10-year Treasury is now at its highest level in 16 years. Currently the 2-year Treasuries stand at 4.94%. 5-year currently at 4.39% and the 10-year Treasuries are at 4.25%. Treasuries however, are not the only concern……………..

China

The economic condition of China has finally maneuvered to front and center over the past 6 weeks but this concern over China has been ongoing for months. Evergrande, a mammoth construction company on the mainland filed for bankruptcy in the US and to add to the pain, the People’s Bank of China stepped in to help the country’s currency dilemma. If we were to turn the clock back to 2015, we would see that when the yuan (China’s currency) came under enormous pressure that summer the Dow Jones dropped drastically because of it. On August 24^th, 2015, the Dow opened in the negative, down 1,089. By the day’s end it closed down 588 points. Despite the current rumors of war with China over Taiwan, make no mistake that if China sneezes, the US markets will catch a cold!

The Current Markets

Friday’s close saw the S&P 500 at 4,369, down 2.1%. The Dow Jones ended the week at 34,500 down 2.2% and the Nasdaq ended Friday’s trading at 13,290, off 2.6% for the week. The Russell 2000, the Small Cap barometer closed at 1,859, losing 3.41% for the week.

Although the inflation rate has moderated significantly over the past year, it continues to weigh on the minds of investors and to the economy in general. It is becoming obvious that the Federal Reserve will raise rates again at the September meeting. On Tuesday the President of the Minneapolis Federal Reserve gave the opinion that it is still to early to say for certain that inflation has been curtailed,  believing that the inflation rate continue to be too high. The minutes of the July Fed meeting observed that there is a consensus at the Fed that inflation could flare back up. This information added to investors’ worries which showed on Wednesday’s losses.

After three weeks of selling there is a chance that a bounce in the market could happen soon. This is not to say that we will see an immediate turn around in the market but corrections as we’ve experienced these last weeks usually initiate a rally followed by another selloff – another reason that our subscribers benefit from our analysis and are ahead of the curve so far this year.

The latest correction was spread out over most of the 11 sectors of the stock market with the Small Cap markets down considerably. For the market to have continued its strong early-summer upward movement, Small Caps needed to lead the way – an observation made on these posts over the past weeks. That they did not confirms their effect on the market.an

One dramatic observation we’ve seen is the cost of living in the typical American household is one that was put out by Moddy’s Analytics – Americans spent over $700 more in July for the same goods and services that they did in 2021! Although inflation has slowed as we’ve wrote above, this (dramatic) rise illustrates the cumulative impact that the rate of inflation has had on American households.

The banking industry is beginning to show signs of problems once again. Our readers will recall the peril the nation’s banks were embroiled in earlier this year.  JP Morgan, Bank of America, Wells Fargo, and Citigroup were downgraded this week and there is real concern that the banking industry is in for another slide. How much remains to be seen.

Mortgage rates, which are now above 7%, could be headed for 8% should the Federal Reserve raise rates – an almost foregone conclusion – once again. The housing market is feeling this pinch as are builders of new homes. It is just becoming more expensive to pay for a mortgage.

Unemployment benefits filings fell by approximately 11,000 from the previous week and 239,000 Americans are now without work however the labor market may be starting to ease which as we’ve observed over these past months, could be good news concerning inflation.

The Volatility Index (VIX) which we track has risen moderately these past few weeks but is still signaling little fear among investors that there is serious trouble ahead. While this is not a hard and fast barometer, the VIX does give a glimpse into the mind of the investing public.

In Conclusion……….

As our subscribers know, 10 days ago (8/10 and 8/11) we issued sell signals for our previous positions. Last Sunday (8/13/23) we issued a sell signal for those in the financial sector. These alerts, if heeded, were an opportunity to retain profits instead of experiencing a loss as would have been the case of a ‘Buy and Hold’ strategy this past week. Our subscribers have benefited from our strategies as you can see……..