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Weekly Stock Performance

Markets had surprisingly strong performance in this shortened week ending September 9. The weekly performance summary is below:

Closing Price as of 9/2/22 Gain
Stocks/Indices 7/26/2022 Last Week This Week Last Wk From 7/26
DOW JONES INDUSTRIALS $31,764.00 $31,304.41 $32,031.70 2.3% 0.8%
GOLD (GLD) $160.00 $159.38 $159.82 0.3% -0.1%
TECH (QQQ) $294.30 $295.35 $307.09 4.0% 4.3%
BONDS (TLT) $116.84 $110.30 $108.31 -1.8% -7.3%

Stocks performed well, suggesting that they don’t believe Chair Powell will, or be able to, follow through on his tough stance. Bonds, on the other hand, seem to be saying otherwise. Gold is undecided.

From the July base-point, all categories except Tech are negative. Bonds are down rather strongly while Tech is reasonably strong in the opposite direction. Gold and the DJ average have been neutral. Overall, markets are reflecting the belief that interest rates are rising, although not strongly enough  to seriously penalize stocks (at least not yet)!

It is difficult to imagine the divergence in stocks and bonds continuing much longer. Clearly, the bond market is reflecting the past rate hikes. Yet stocks seem less convinced than bonds that they will be affected. Gold seems confused.

I expect that stocks will soon succumb to the rate increases already in place and the potential for  more to come. These are not recommendations; they are merely expectations. If stock markets believe the Fed is serious and capable of doing what it has promised, stocks are likely to sell off, perhaps precipitously. If stocks continue to rise, it is a signal that they don’t believe Powell’s promises. If that happens, then Gold is apt to soar. It has been constrained thus far by the strengthening of the dollar versus other currencies. If the Fed backs off, then gold is apt to shine as markets will see higher inflation as likely.

Be cautious. Very cautious!

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