Weekly Market Outlook: Another Week, Another Win

The market may be due for a correction, but that's certainly not stopping the bulls. It's also not starting the bears. Stocks tacked on another 1.7% last week, moving deeper into record-high territory in the process. Decent earnings news and a positive spin on economic data was all the excuse would-be buyers needed to become actual buyers.

That's something of a problem, of course. While this is the right season for the usual year-end bullishness, things are getting a bit uncomfortable. Stocks are not only overvalued on a look-back basis, but are pretty frothy on a forward-looking basis, as well -- even factoring in the time needed to fully recover from the COVID-19 lull.

We'll take a closer look at those valuation metrices below. First, let's recap and preview the economic data that's ultimately driving the market to relatively expensive levels (and see if it's still "worth it").

Economic Data Analysis

There wasn't a great deal of economic news from last week to sift through, though what little there was was stiff, culminating in November's jobs report.

But, first things first - last month's ISM data. Both the services and the manufacturing version of the economic strength measure remained above the critical 50 level. But, both also peeled back from October's levels. It would be far more encouraging to see them each continue to make forward progress.

ISM Services and Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

Auto sales also slumped, though we don't know exactly how much, as the final data is still being collected. Expect more on that data set a month from now, when it's back on the economic report calendar.

Last week's big Kahuna was of course was November's jobs report. It wasn't exactly thrilling. Though the unemployment rate fell from 6.9% to 6.7%, that slide is a bit suspicious.

The expected payroll growth of 650,000 only came in at 245,000. Although not shown on our chart below, the total number of people now working only grew 160,000 in November, while the size of the official labor force actually contracted. So did the participation rates. We made progress, but it was slight, and the numbers exaggerate the progress.

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