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FRB Chair Yellen spoke Friday.  In my view little new ground was broken however as written previously any Fed address can be of significance given their potential influence upon the financial markets.

Perhaps the most quoted remark from her address is “the ongoing improvement in the economy would warrant another interest rate increase in the coming months.”  I view this comment as an explicit statement that rates will rise but not in June, perhaps hinting that if the data continues to improve at current pace, July is all but a given.

Yellen’s remarks had little impact upon the markets, trading that slowed to a crawl by the time she made her remarks because of the Memorial Day holiday.

This week can be of significance especially relating to the outcome of June’s Fed meeting especially if the data surprises on the upside.  The first week of any month in filled with top tier statistics culminating with the BLS labor report.

As stated above I do not believe the I think the central bank will not increase rates at the June 14-15 meeting and err to the side of caution and postpone any action until July.

My rationale is simplistic. There will be another jobs report released by that date offering additional evidence to support such the rebound. Second, the outcome of the Brexit vote will be known.

However with the above written, if there is a series of downside surprises, the odds of a July hike will be greatly reduced.

What will happen today?

Last night the foreign markets were mixed.  London was down 0.18%, Paris down 0.43% and Frankfurt down 0.42%.  China was up 4.09%, Japan up 0.98%and Hang Sang up 0.90%.

The Dow should open little change ahead of a large data week that may indicate how ready the economy is for higher rates.  The 10-year is off 5/32 to yield 1.87%.

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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.