Stocks fell this week as high long-term bond yields and rising oil prices weighed on markets.
MACROECONOMIC UPDATE
- The National Association of Home Builders (NAHB) Housing Market Index ticked up from 34 to 35 in August, but the reading remained below the threshold of 50, continuing to show widespread pessimism amongst builders.
- The Pending Home Sales Index from the National Association of Realtors fell -2.3% in July as it remains depressed near all-time lows.
- Housing Starts dropped -12.4% while Building Permits rose 5%. Both measures remain in line with their levels of the last few years as the housing market continues to be stagnant.
- The Conference Board’s Leading Economic Index (LEI) ticked up 0.2% in July following its -0.1% decline in June. The Conference Board now anticipates economic growth driven by investments in AI while also forecasting that consumer spending will be further weighed on by persistently high costs.
TECHNICAL UPDATE
- Bearish Distribution in the InvesTech Negative Leadership Composite (NLC) moved to -14.9 as market leadership deteriorated this week. If Distribution continues to build, it would be an important warning that the bull market could be nearing an end and it is time to further raise defenses.
- The InvesTech AI Index declined throughout the week as concerns over aggressive debt issuance and spending returned, putting AI-related stocks under pressure. This Index is critical to watch, and if it falls below recent lows, it will indicate that investor psychology surrounding AI is breaking down.
INVESTECH MODEL FUND PORTFOLIO
There are no changes to the Model Fund Portfolio this week, which is comprised of 62.5% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 27.5% cash held in short-term Treasurys or a money market fund. This results in 57.5% net equity exposure.
Latest issue of InvesTech Research out later today!
In this month’s issue, we examine the current market risks as well as the residual bull market evidence, the Fed’s worsening conundrum, and valuable “value-driven” steps that will help grow your investment portfolio and protect against uncertainty and volatility ahead. It’s an issue you won’t want to miss!