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Will today’s employment data alter perceptions?  Equities traded significantly lower on Apple’s revenue warning.  Is this a warning to all multinationals, especially those with a large exposure to China?  Apple did not mention tariffs as a major reason for the “magnitude of economic deceleration, particularly in greater China” for its warning.

Apple stated there are a number of factors including the strength of the dollar, fewer subsidies from phone service providers and existing customers sticking with older models via cheaper battery replacements.

Some have opined that Apple’s falloff is primarily the result of high price and the rise of cheaper more comparable rival devices in a very saturated market.

Yesterday was three months to the day that Apple was the most valuable company in the world, valued at over $1.105 trillion.  At yesterday’s close it was worth about $675 billion or a decline of almost $430 billion or 39% in 90 days.  The decline is greater than the capitalization of all but four S & P 500 companies.

Wow!  Talk about the velocity of change!!

At 8:30 December’s employment data is released.  Non-farm and private sector payrolls are expected to increase by 181k, as well as a 3.7% unemployment rate, a 0.3% increase in hourly earnings, a 34.5 hour work week and a 62.9% labor participation rate.

The jobs data could potentially alter views about the underlying strength of the economy.  Several days ago consensus is estimating a 2.5% 2019 growth rate, nominally lower than the 2.6%-2.7% range of the FOMC.   To write the obvious there is a disconnect between those of economists and those who write financial headlines.  Who is correct?

Some will suggest the markets are suggesting a recession is at hand.  As noted yesterday there have been 14 bear markets since WWII and only seven recessions.  As also noted many times, the markets are entirely dominated by algorithmic and risk parity based trading models, strategies that rely primarily upon momentum and capitalization in a market devoid of liquidity.

All the markets are suggesting is that the traditional market stabilization mechanics are absent because of regulatory fiat that emphasizes speed and cost of execution over liquidity and capitalization.

Last night the foreign markets were up.   London was up 1.40%, Paris up 1.31% and Frankfurt up 1.31%.  China was up 2.05%,  Japan down 2.26% and Hang Sang up 2.24%.

The Dow should open considerably higher on trade optimism.  Planned talks between the US and China commences Monday and China cutting its reserve requirements.  Will the *;30 job’s data impact the opening?   The 10-year is off 15/32 to yield 2.61%.


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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.