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Treasuries fell while the dollar advanced in a reversal of Tuesday’s trading as the markets weighed the prospect of rising inflation against the political uncertainty of a Trump presidency.  Equites fluctuated amid corporate results.

Data indicating a fifth consecutive monthly advance in the cost of living bolstered arguments inflation is taking hold in the US.  Similar statistics indicated a like environment in both Britain and the Eurozone.

Will inflation continue to accelerate, the inverse of the previous five years when pricing pressures were all but nonexistent?  Such would have a large ramification on the sovereign debt markets and any other income alternative investments.  Perhaps the only certainty to write that once inflationary pressures begin to accelerate at a rate faster than expected, to tamp such pressures is equivalent to putting toothpaste back into the proverbial tube.

The Fed Beige Book or the statistical reference utilized at the upcoming Fed meeting suggested wage inflation at either end of the spectrum is accelerating, the later the result of the lack of qualified workers and the former because of political pressures.

Will cost push or wage inflation become an issue as it did in the late 1970s, the last time there was a dearth of qualified workers, the LPR was around today’s level, and demand pull inflation accelerated to levels not experienced since the end of price controls at the conclusion of WWII?

Treasuries were crushed yesterday on the data with yields on the thirty year over 3% and 10 year in excess of 2.42%.  Equities were quiet.

What will happen today?  Will today be regarded as the day the megacapitalized growth issues began their descent into life support because of the formal collapse of globalism?  Many of the largest growth firms have over 70%of their revenues from trade.

Last night the foreign markets were down.  London was down 0.56%, Paris down 0.06%, and Frankfurt down 0.08%.  China was down 0.38%, Japan up 0.94% and Hang Sang down 0.21%.

The Dow should open quietly lower.  The 10-year is off 1/32 to yield 2.44%.

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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.