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The NASDAQ fell about 0.50%% as Apple and Twitter vastly disappointed.   The S & P and Dow posted nominal advance, the result of rising crude and an uneventful Fed meeting.   If I wrote three months ago the typical stock would be up following a profit shortfall of several of the market leaders, most would think such remarks as outlandish at best.

Many times I had opined a simple premise for any advance is more buyers than sellers.  If everyone owns a sector/company and selling commences, who is left to buy?  Conversely if no one owns a company/sector any type of buying will lift values.

Several months ago I referenced a JP Morgan report stating approximately 82% of the volume of a typical stock is result of index funds, stating there is no real positioning of shares outside of index/ETF funds.  The big get bigger and the small get smaller.  The report further stated this is a major reason why the vast majority of portfolio managers have vastly underperformed for at least the last five years

Are the averages on the verge of a tectonic change where the indices mark time at best while the typical company vastly outperforms?  In other words, is yesterday a harbinger of things to come?

Speaking of yesterday, the Federal Reserve left open the door to raising interest rates in June by tacitly nodding to improvement in the global financial markets and downplaying recent weakness in the US economy.  In my view the statement was close to expectations…any rate rises will be slow and gradual as the economy gradually improves.

Today first quarter GDP is released.  Consensus is expecting a 0.7% growth rate and consumption growth of 1.7%.  How will the markets respond to the data?  Did the Committee infer growth will be anemic but the forward looking indicators suggesting momentum?  Perhaps.

Last night the foreign markets were down.  London was down 1.06%, Paris down 1.43% and Frankfurt down 1.25%.  China was down 0.27%,  Japan down 3.61% and Hang Sang up 0.12%.

The Dow should open moderately lower as the Bank of Japan unexpectedly refrained from adding stimulus measures.  To write the obvious, the markets still respond to inferences of monetary policy, the high power elixir that has assisted in boosting equity and fixed income prices.  The 10-year is up 4/32 to yield 1,84%.

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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.