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Things change so quickly

| September 11, 2023

For the better part of the last couple weeks, the dreaded ‘rona has caught up to me. Coughing, congestion, fever…sounds about right. So, I’m recovering after doing my quarantining and back to bugging you on a Monday. Lucky you!

BC (before Covid), I had mentioned how the bears were back out and there was a fair bit of fear coming back into the markets. That didn’t last long, as the bullish sentiment has come rushing back. Ideally, I would rather scare the bulls away for a longer time, but that’s not how things are working right now.

So, the bulls have a +13% advantage over the bears at this time. A negative spread is better for the long-term, but again, it is what it is.

The economic tub is still full of cash sloshing around, and it is slowly being pulled out of the system by the Federal Reserve. 

But let’s be clear, while the M2 money supply is negative and has been for most of this year, it’s not helpful when governments are spending like…I’ll stop there and let the well-regarded Jamie Dimon say it:

In what should otherwise be considered a slowdown, fiscal spending is keeping the economy feeling better than it probably should be feeling at this point in the cycle.

The dollar is back up to resistance around 105 after a multi-week rally. 

That is creating inflationary pressures on US companies that sell internationally, which is pretty much every large company that we can think of. We may end up seeing that pressure come through in the next couple of earnings seasons. A big reason the dollar is so strong is because the Federal Reserve is keeping interest rates so high. My guess is that if the US government didn’t have such a large deficit and managed to keep spending close to their revenues, our economy would likely be much closer to the end goal of lower inflation and normal spending. But when you are adding an additional $2 trillion or so in debt this year alone, that money is going somewhere and is prolonging the road back to normal.

Our model is still holding on but has started to shift back from the very bullish stance it was in June to something that could be conservative in the near future. We will see with time.

That also seems to coincide with our money flow model as well. It looks like it may also go conservative relatively soon.

So, we will see what happens over the next few weeks or couple of months. We are in the seasonally weak time of year for markets. Historically, August and September are the weakest months of the year. And, if you believe this stuff, we are coming into the fourth year of the Presidential cycle. It tends to lean somewhat bullish, so we will see how that goes (correlation or causation?)

So, kids are back in school, I’m recovering from COVID, and we will see if the market has the sniffles or a full-blown cold. Nothing definitive here. Just a quick survey of the landscape.

What is definitive (and more important) is the need to not overlook the importance of remembering 9/11. On this 22nd anniversary of that fateful day, I remember it like it was yesterday. We remember those that lost their lives in the planes and buildings and those selfless emergency workers that sacrificed so much to help everyone they could get to safety. We remember those who have since fought to retain the freedoms we enjoy that were challenged on that unforgettable day. Looking back, I’m sure you remember where you were and what you were doing. I know I do. God Bless those families that still struggle to deal with the loss and the children back then that are now having children of their own.

I hope you have a great week, let us know if you have any questions.