The Stock Market And The U.S. Economy In The Coming Two Weeks

The Nine-Week UPTREND As of Dec. 23, 2022

The current Bull Market, started on March 09, 2009, has run for thirteen years, nine months, and 14 days (or 5,037 days), as of Friday (December 23, 2022), gaining 468% (five times-) from 676.53 to 3,844.82, while as of Friday (September 09, 2022) to 4,067.36 jumped 501% (five times+), as reported.

According to my bear market criteria, our dear Bull is alive at this moment. The Bull (which is represented by SPY) moves ahead with still strong last leg and with the resilient U.S. economy, hand in hand, as described by the following excellent quote:

“This process of an increased reliance on financial asset appreciation as nearly the only means to generate wealth has left much of the developed world in a situation where the economy is now closely tied to the growth in financial assets.

For those who believe the stock market is not the economy (a statement which has been true for much of history), in today’s world, the evidence now suggests otherwise.

A period of economic stagnation and a reliance on easy financial conditions have changed the game. Financial assets, namely stocks and housing, are responsible for much of the trends in not just economic growth, but employment, corporate capital expenditures and even the Federal deficit.

The… economy is thus an integral dynamic all investors should be aware of and appreciate.” (“The Stock Market Is The U.S. Economy”)

Santa Claus Rally

KEY POINTS

• Santa Claus rallies in 2008 and 2018 predicted strong gains in the market the following year.
• There’s no causal relationship between the Santa Claus rally and broader market behavior, but it has been surprisingly accurate.
• A rally could lead to optimism for 2023, but investors shouldn’t make it their primary focus.
• Motley Fool Issues Rare “All In” Buy Alert

With just a few days left in the year, the stock market is basically assured of finishing deep in negative territory for 2022. History has shown, though, that more often than not, the stock market has rallied at the end of the year in what’s come to be known as the Santa Claus rally. While it might seem like an idle phrase, it actually has a specific definition and was first noticed by Yale Hirsch, author of the Stock Trader’s Almanac in 1972.

The Santa Claus rally is defined as the S&P 500’s general pattern of gaining in the last five trading days of the year and the first two trading days of the next year. This period will begin on Dec. 23, 2022 and go until Jan. 4, 2023.” (“Will We Get a Santa Clause Rally This Year? Recent History Says Yes.” The Motley Fool)

Table 1: The Stock Market Momentums & Trends
DATE	CLOSE	%CH	m/P
11/11/22	3,992.93	#VALUE!	P
11/14/22	3,957.25	-0.89%	m
11/15/22	3,991.73	0.87%	P
11/16/22	3,958.79	-0.83%	m
11/17/22	3,946.56	-0.31%	m
11/18/22	3,965.34	0.48%	P
11/21/22	3,949.94	-0.39%	m
11/22/22	4,003.58	1.36%	P
11/23/22	4,027.26	0.59%	P
11/25/22	4,026.12	-0.03%	*
11/28/22	3,963.94	-1.54%	m
11/29/22	3,957.63	-0.16%	m
11/30/22	4,080.11	3.09%	P
12/01/22	4,076.57	-0.09%	m
12/02/22	4,071.70	-0.12%	m
12/05/22	3,998.84	-1.79%	m
12/06/22	3,941.26	-1.44%	m
12/07/22	3,933.92	-0.19%	m
12/08/22	3,963.51	0.75%	P
12/09/22	3,934.38	-0.73%	m
12/12/22	3,990.56	1.43%	P
12/13/22	4,019.65	0.73%	m
12/14/22	3,995.32	-0.61%	m
12/15/22	3,895.75	-2.49%	P
12/16/22	3,852.36	-1.11%	m
12/19/22	3,817.66	-0.90%	m
12/20/22	3,821.62	0.10%	P
12/21/22	3,878.44	1.49%	P
12/22/22	3,822.39	-1.45%	m
12/23/22	3,844.82	0.59%	P
NOTE
1. CLOSE: The S&P 500 Index’s Closing
2. %CH: The Percent Change.
3. m/P: minus/Plus.
4. * : No Change (between +0.05 and -0.05)
5. Data Source: Yahoo Finance

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The Fate of The Nine-Week Uptrend?

As shown in Table 1, although the negative market sentiment and the Fed inflation-curing process pulled the market down in the several weeks. Counting m/P in last two weeks (Dec. 9 thru Dec 23), however, evenly shared by MS and PS.

As a consequence, our nine-week uptrend is struggling (just like me, as I am hospitalized due to fractured right leg and femur bones).

Track its eight weeks for the Uptrend:

A Friday gain in the equity market was very rare in recent years. We, however, had the Friday rally five times in a row:

• A Jumbo +2.4% on Oct. 21.

• A Whopping +2.5% on Oct. 28.

• A Very Unusual Dramatic + 1.4% Gain in the Last Minute after fluctuations on Nov. 4.

• A Decent +0.92 Again on Nov. 11.

• A Weak +0.48% on Nov. 18, but the inching was very special because it was a really last-minute U-turn of the S&P 500 which moved up and down persistently, after Nasdaq joined the DOW which was in the plus column all session. The market weakened in the last three weeks.

• On Nov. 25, the S&P 500 was in A Pause (or Virtually No-Change, registered -0.03%, as shown in Table 1).

• In the week (Nov. 28 through Dec. 02), a Big Shoot +3.09% on Wednesday (Nov. 30) was easily offset -1.91%, combining four negligent downs: a) -1.5% on Monday (Nov. 28), -0.16% on Tuesday (Nov. 29), Thursday (Dec. 1), and Friday (Dec.02) -0.12. Actually, it was flat or no change because S&P 500 fluctuated along the 0% line in the last minutes.

• In the week (Dec. 05 through Dec. 09) S&P 500 on Friday slumped to its worst weekly performance since late September, slipping 3.37% to end at 3,934.38 points. The benchmark index posted losses in four out of five sessions, ahead of final Fed meeting of the year. A 5 MS (Dec. 01 thru Dec. 07, consisted of a) three negligent m – -0.09% on 12/01, -0.12% on 12/02, and -0.19 on 12/07, and b) two significant m – -1.79% on 12/05 and -1.44% on 12/06) was registered, but it was snapped by a decent +0.75% on Thursday (Dec. 08).

• “[{On Dec. 09, 2022)]’s session started on a weaker note as market participants digested the hotter-than-expected Producer Price Index ((PPI)) for November. For most of the session the main indices clung to narrow trading ranges near their flat lines with both buyers and sellers lacking conviction. Things deteriorated noticeably, however, with about 30 minutes left in the session when the S&P 500 cracked an intraday support zone in the 3955 area. The selling pinned the indices deeper in negative territory and left them at their lows for the day when the closing bell rang.” (Charles Schwab)

• “Today [(Dec. 16, 2022,) [broad] selling efforts brought the S&P 500 below a key support level at its 50-day moving average (3,864) shortly after the opening bell. The late afternoon trade saw the S&P 500 lift off its session low to test that level again, but it ran into resistance and faded away into the close…

The Treasury market settled the session in mixed fashion. The 2-yr note yield fell five basis points to 4.20% while the 10-yr note yield rose three basis points to 3.48%.” (Charles Schwab)

• As a result, the eight-week Uptrend was intact.

Self-directing investing: Investing By The Investors

The early 2020s is quite different, compared to in the early 1990s:

First, in the early 1990s, a significant amount of capital (up to $18K) was needed to start a well-diversified mutual-fund portfolio (MFP). The minimum initial investment amount for most MFs is 3K. To set up MFPs with 2 MFs, 4 MFs, and 6 MFs, we need 6K, 12K, and 18K, respectively.

Second, the trading commissions were about $30 at Charles Schwab (which was a leading so-called “discount brokerage,” pulling down other “full-commission” brokerages, charging $50 or more.

Paying $60, or $100 for a rounding buy/sell, investors can’t afford for “short-term” trades which I and some investors are doing.

Third, most important, trading on online-free-commission services, accessing free market-data and news, transferring money through ACH (Automatic Clearing House), that is the most secured, fast, and free money-transfer service, provided by the U.S. government.

In sum, as I recall those days in the early 1990s, it seemed as if we were in another world.

In the Early 2020s World

First, technically we need only a very tiny amount of money (i.e., $100) to set up 1) one brokerage account, 2) one checking account, and 3) one online savings account.

It’s possible because not only most accounts require no minimum to open, but also Charles Schwab pioneered an innovative “Schwab Stock Slices,” “you choose the stock you want from a list and an amount to invest. That’s it!” (Charles Schwab)

For example, suppose you have 17 stocks which were randomly selected, as shown in the following Table. The mean and median are $125.93 and $129.62, respectively.

You can allocate 6 lower-price stocks (INTL, VZ, WBA, CSCO, DOW, and KO), buying (0.36 share, 0.27 share, 0.25 share, 0.20 share. 0.20 share, and 0.13 share, respectively) with $60, $35 in your online saving a/c, and $5 in your checking a/c.

DJIA (17)
TICKER	PRICE	RANK
INTC	$27.96	1
VZ	$37.70	2
WBA	$40.53	3
CSCO	$48.99	4
DOW	$51.00	5
KO	$63.84	6
XOM	$106.46	7
MRK	$111.23	8
MMM	$125.93	9	MEDIAN
JPM	$132.47	10
AAPL	$141.68	11
IBM	$149.36	12
PG	$152.84	13
CVX	$172.33	14
VZ	$211.97	15
AMZN	$271.13	16
GS	$358.00	17
MEAN	$129.61
NOTE
1. DJIA (Dow Jones Industrial Average)
2. Prices at Dec. 15, 2022, 6:30 a.m. ET
3. Source: TD Ameritrade.

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Investing By The Investors

The above illustration with $100 is possible theoretically, but it’s not realistic. Meaningful minimum amount of self-directed investing that consisted of a couple of well-diversified portfolios and a couple of online savings accounts would be several five-digit capitals (i.e., more than $10,000).

With a significant sum of capital or a well-paid job, investors have one of the best way for their retirement money, being a “By Self-Directed Investor.”

On Dec. 14, 2022, one of the readers of my article, NextGenInvest, plugged a very good comment:

“Thank you for your article! Does your suggested investment advice allocation change any for someone in their 40s?

I’m so used to not even looking at bonds due to them not paying much of anything that it’s hard for me to look at anything bond related.

Is the 60/40 portfolio making a comeback after being left for dead?” (A Comment in “Investing In The Last Years…)

The following was my reply:

“Thank you for asking. You’re the first investor to approach me as your adviser. The following is my recommendation:

Read “Investing…Vs Trading…Or Both” seekingalpha.com/… and check 1) “Six Long-Term Portfolio Templates With Charles Schwab ETFs & TD Ameritrade ETFs,” and LakeOZ boater’s comment.

• Set one Portfolio (or two if you prefer), by choosing among six templates.

• Allocate money in equity vs. bond (60:40) permanently, meaning no rebalancing. “Is the 60/40 portfolio making a comeback after being left for dead?” (From your comment) The 60:40 has never been dead!

• Investment horizon is 5 years or much longer, hopefully about two decades.

• You can start any time, and add more money from time to time, being advantageous by dollar cost average (DCA).

• VTI/BND or SCHB/SCHZ are the core components of your Portfolios. Compounded Dividends and Capital Gains Over 5 Years Will Become The Main Engine Pull Your Portfolio By Itself, as shown in 5 Years…seekingalpha.com/…

I needed at least three pieces of info to advise any client in the office: 1) The size of investing, 2) the tolerance level of risk, and 3) age. (The gender was not important). All I have is “40s” and “60/40”. The above reply was based on this info.

Some takeaways which are helpful, by giving a more general and detailed advice to most younger investors to start their early investments toward to being a millionaire in a couple of decades later:

• If you’re comfortable allocating more on equity than bond, you may go with 70/30 or 80/20, but not further. Because the role of bonds is not inferior to equities in a long haul.

• I have advocated Permanent Asset Allocation seekingalpha.com/… for many years: What are the relative merits of PAA, compared to Rebalancing (RB) (that is Vanguard and others’ advice)?

• First, RB requires good timing, which must be challenging. Simply, we don’t know whether one asset category (i.e., stocks) hits a top and maintains, meaning the top one would go higher continuously) for a while, or not.

• Second, more important, comparing the current prices of two asset categories is possibly misleading. Because bond yields are much higher than dividends of stocks, and some portfolios even are not dividend-reinvested.

• Third, PAA provides unintended Dollar Cost Averaging (DCA) which is an excellent systematic investment timing strategy. Younger investors can accumulate (or save) money with small amounts regularly for a long period. PAA gives them DCA as a byproduct, but RB doesn’t.” (From my comment on “Investing In The Last Years…”)

Custodial investing: Investing For The Investors

You can invest For Others, such as your own miners, relatives, neighbors, or friends: One way is as an “Attorney of Power” in their own accounts. The other way is to go with a custodial account.

“A brokerage account is a must-have if you want to be a great investor. With a brokerage account, you can buy and sell stocks along with a host of other investments that can help you reach your financial goals. The more time you have to invest, the more likely you are to achieve the growth in your portfolio that you’re seeking to attain.

For most people, owning a brokerage account in their own name is the simplest solution available. However, most brokers won’t let minor children open accounts directly. If you want your children to have their own investments, then opening custodial brokerage accounts can be a great solution that will open their eyes to the possibilities of the investing world. However, custodial accounts also have some requirements you have to follow, along with some potential traps for the unwary.” From “Custodial Brokerage Account 101,” by The Motley Fool).

Club Investing: Investing With The Investors

You also can accomplish your financial interests, as an individual, as a group leader, or a business owner, With Others.

You can start an investment club:

· Investment clubs are widespread and a way for individuals to learn about the stock market, partake in larger investments, and to get first-hand experience.

· Investment clubs are most often set up as a legal partnership or a limited liability company (LLC).

· Most investment clubs require an initial lump-sum payment for investing purposes and monthly contributions going forward.

· Tips for joining an investment club include thinking about a long-term investment rather than short term, defining your investment style.

Conclusion

Self-directed investing, custodial investing, and Club investing are finally available for retail investors like you, with a reasonable initial amount of money, say more than $10,000.

This great opportunity, introduced in the article, clearly opens a smooth avenue to reach your never-dreamed of affluence in a very long term, which is about 2 decades.

All you have to do is: 1) Pick one (or two) portfolio templates in my 28 articles, 2) start now, not later, and 3) stick to your investing plan, not abandoning it, no matter how the market performs in at least two decades, as many millionaires did.