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FRB Chair Yellen’s semiannual congressional testimony was a nonevent, offering a subtle change to her outlook from less than a week ago, pushing the prospect of additional interest rate increases further into the future.  Yellen stated the central bank were on watch for whether, rather than when, the economy would show clear signs of improvement, acknowledging the possibility that growth could be slow to pick up.

Yellen echoed the familiar remarks that she is optimistic about the future and warned all not to over react to one or two reports, a direct inference to Ma’s weak labor report.

In her prepared comments, she referenced tomorrow’s Brexit vote and uncertainty over China’s expansion.

In other words and as mentioned above, no new ground was broken.

Markets were essentially unchanged on light volume, the result of Thursday’s Brexit vote, which polls suggest is still close to call but momentum is growing for the “remain” side.  Currently the odds are about 26% England will leave the EU.

Oil shares were yesterday’s market leader as oil equities rallied for the third consecutive day the longest advance in two month even as crude prices dropped.

Treasuries were nominally lower as the flight to quality bid continued to erode, falling for the fourth the consecutive day, the longest decline since April.  Moreover, a gauge of demand fell to the lowest since 2009 at the auction of the five year notes.

Last night the foreign markets were up.  London was up 0.64%, Paris up 0.67% and Frankfurt up 1.03%.  China was up 0.94%, Japan down 0.64% and Hang Sang up 0.89%.

The Dow should open nominally higher as the odds are only one in four England will leave the EU.  Oil is again over $50 barrel on an inventory drawdown greater than expected.  The 10-year is unchanged at a 1.70% yield.

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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.