We are making this week’s Market Update free
Listening, watching and seeing the various opinions, signals and indicators regarding the economy, the stock market and the outlook for both has been quite enlightening. We don’t say that as a compliment by the way.
For the past 7 months, you have heard that we’ve “turned the corner”, there would only be two more rate hikes, inflation was under control, the stock market is ready to soar to new highs and that if there was any recession (at all) it would be a ‘soft’ one. You’ve heard that in the mainstream – not from us………
As our past posts verify, we have been more than concerned over the euphoria spouted by market observers and gurus. Over and over throughout these past months we have continued to urge a cautious approach – coupled with a proactive management of your money as found with GaneWisdom/Market Edge – as well as to not buy into the hype put forth by the major brokerage houses. A case in point….
The Yield Curve, which we refer to often here, has been upside down for months. When short-term rates are lower than long-term interest rates, the economy is heading in the right direction or at least not heading in the near-term for turbulent waters. When short-term rates are yielding a higher rate than long-term rates – as is, and has been, for months – what’s known as an ‘Inverted Yield Curve’ takes place. Over and over throughout these pages, we have put forth our analysis based on many years of market observation, hands-on experience, and sound financial strategies with the intention of minimizing investment losses while taking advantage of market upswings. Those who have followed our guidance can attest to this.
Although the above is not (solely) intended to rejoice, gloat, or celebrate our accomplishments, we hope that it verifies our reliance on ‘what is’ as opposed to ‘what we’d like it to be’. Our analysis is accomplished not only through research but looking further into indicators that others don’t (or don’t want to) see and passing that information along to you, our subscribers with the intention of maximizing the rate of return for your dollars. In the hope of not sounding completely self-serving, we believe that the value to our subscribers far exceeds the very minimal cost of that subscription. Once again – please refer to our previous posts and judge for yourself.
Home sales have falling across the United States; however, the housing market is still out of reach for too many Americans. Mortgage rates are the highest in 22 years, the current national level being 7.79% for a 30-year mortgage, 6.779% for a 15-year mortgage and 6.981% for an adjustable-rate mortgage. The median resale price of a home is north of $400,000. In market after market, we are experiencing an imbalance between current homeowners and those who wish to be. Homeowners don’t feel the need to sell unless there is a compelling reason to do so. In fact, many say “Why should I? I will have to pay a higher, often double, mortgage rate than I have now!” It’s difficult to argue that point. Another heartbreak for those wishing to purchase a home (another or new) is the fact of severe competition. Over and over a purchaser finds the house they’ve put a bid on, has received higher offers since they’ve done so. Competitive bids are one thing but when emotion takes hold – “I just have to have this house” – serious financial trouble can develop. What exactly does this topic, housing, have to do with the economy and the stock market? A lot actually…………..
The cost of housing is one of the major components used by the Federal Reserve when calculating inflation. Although the Fed continually states that their goal is a 2% annual inflation rate, any increase in the cost of living will provide the basis to raise interest rates. The current inflation rate is 3.2% and the high cost of housing is one of the primary causes for this number. Where does the US housing market go from here?
In our research we see the rates continually edging up. It is likely that the Federal Reserve will not raise interest rates in September, but this inaction is due to various factors which we’ll explore later. As we had pointed out last week, should the Fed continue to raise rates, we will see a national mortgage rate averaging in the vicinity of 8%. Because the Federal Reserve does not raise rates in September (should that indeed come to pass) we caution to not be blind to the likelihood of further increases this year.
The S&P 500 closed Friday at 4,405, up for the week0.82%. The Dow Jones saw a loss for the week of
- 0.45 closing Friday at 34,346. The NASDAQ closed the week at 13,590 but saw a nice return of + 2.26%. The Russell 2000, the barometer of the Small Cap market closed at 1,853 down for the week by – 0.31%. As we’ve pointed out, in order for the stock market to continue its upward trajectory, the Small Cap stocks would need to be involved. For the first weeks of the market run-up, Small Caps participated, however when they left the party early, the market struggled to find reasons to advance. We have seen this scenario, and analysis, play out vividly these last weeks. The Russell 2000 has declined - 6.40% over the last month. To further verify our data, for the last 30 days the S&P 500 lost -3.53%, the Dow -3.30%, and the NASDAQ -3.80%.
As pointed out above (and in our previous posts) the Yield Curve continues to give us heartburn. Despite the upbeat prognoses we’d continually been subject to by various market urus, the Yield Curve sends a very strong signal to the economy, and stock market, as to the probable direction of each. An Inverted Yield Curve, as we’ve stated, happens when short-term rates are above long-term rates and that has not changed for months. Currently the 2-year Treasuries are yielding 5.08%. The 5-year Treasuries stand at 4.44% and the 10-year Treasuries stand at 4.24%. These three rates have risen significantly over the past three months. In our opinion, this is not a good sign for the economy due to the Inverted Yield Curves propensity to signal a coming recession.
The July numbers for manufactured durable goods fell by 5.2% which is concerning given that this indicator grew 4.4% in June. This decrease is the largest since the pandemic, going back to April 2020.
Unemployment numbers fell by 10,000 last week and now we find 1,700,000 Americans out of work.
| Entry Date | Exit Date | Return | |
| (8/28/23) | |||
| 1. S&P 500 loaded mutual fund or S&P 500 ETF | 5/19/23 | 8/10/23 | +9.8% |
| 2. A portfolio consisting of Financial Services. | 6/5/23 | 8/14/23 | +8.0% |
| 3. A portfolio consisting of Leisure goods and/or services. | 6/12/23 | 8/11/23 | +0% |
| 4. A portfolio consisting of Telecommunications. | 6/12/23 | 8/11/23 | +2.2% |
| 5. A Small Cap - loaded fund. | 7/12/23 | 8/11/23 | -0.9% |
Our Current position as of August 28th, 2023 is 100% in Cash (Money Market)
Please watch for our Mid-week Market Alerts should there be any.
* As is the case with any investment, use your discretion and judgement before purchasing and/or transferring. Diversification is always prudent; therefore, our suggestion is using a portion of your portfolio and not the total in any one fund or subaccount. A portion should remain in Cash (Money Markets)
When GaneWisdom/Market Edge went live in August 2022, the goal was to provide our subscribers top-tier market analysis and outlook to those with qualified accounts such as: IRAs, ROTH IRAs, 401Ks, and 403Bs. Our desire was to make this service affordable to anyone. Instead of paying thousands of dollars, or a percentage based on investment assets (which is how Guy managed his client’s money as a Registered Investment Advisor) GaneWisdom/Market Edge charges a very affordable $200 per year. Our subscribers now include those with non-qualified accounts as well as financial professionals. Our market analysis consists of market indicators, trends and strategies which allow our followers to avoid large losses usually associated with the traditional ‘Buy and Hold’ method. Our results speak for themselves and each of our Posts since our inauguration are available under the site’s heading ‘Archive’.
