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Americans are the Most Upbeat About Their Wage Prospects in Seven Years.

Equites came under moderate pressure Friday amid concern Greece will run out time for reaching a deal to stave off default.  European officials are preparing for the worst as Greece’s prime minister’s brinkmanship is pushing its country’s finances to the limit.

Many times I have commented about the complacency surrounding Greece for if today’s headlines were 4 years ago the markets would be down 20% not 200 points.

This week is a FOMC meeting.  There was a sentiment survey Friday stating that Americans were the most upbeat about their wage prospects in seven years.  As noted several times, there is wage inflation in some segments of the economy given the dearth of qualified workers.  I think this is a positive development given such confidence may increase the propensity to spend.

What are the odds there will be an economic melt up, the result of rising wages and home values?  As evidenced by the productivity data, the economy’s capacity to produce goods and services has grown around 2% since the recession ended six years ago.  Will demand eclipse supply causing inflationary expectations to rise?

Typically when the economy transitions towards demand led, good news typically becomes bad news in the immediacy given the propensity of higher rates.  In such a scenario, manufacturers and commodity companies greatly outperform while highly valued growth companies falter.

Speaking of commodities, oil closed up for the week, advancing 12 out of the last 13 weeks.  What is oil suggesting given the extremely negative oil narrative?

The economic calendar is crowded with a host of housing statistics, the CPI and several manufacturing data points.

Last night the foreign markets were down.  London was down 0.81%, Paris down 1.24% and Frankfurt down 1.55%.  Japan was down 0.09%and Hang Sang down 1.53%.

The Dow should open moderately lower on the collapse of Greek debt talks. The 10-year is up 8/32 to yield 2.37%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.