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Is the Economy About to Enter into a “Boom Period”?

Stocks fell by triple digits, its eighth hundred plus point move in nine days. Bloomberg writes this is the longest stretch since 2001 the S & P has not posted consecutive gains—25 days.

The dollar strengthened as data on consumer prices showed signs inflation is perking up.  The Treasury however rallied after strong interest in the sale of the two year note.   New home sales unexpectedly rose to a seven year high.

Commenting about commodities, oil and gold rose to a two week high while copper rose for the fourth consecutive day.

Are the markets at a point of transition?  Perhaps the bigger question, is monetary policy at a critical juncture, considering the first interest rate increase since 2006 is now an impending event?  Several Fed officials have suggested 2015 growth will be stronger than expected.  In recessions past, recoveries are led by the housing sector.

Is the economy about to enter into a “boom period” as suggested yesterday by St. Louis Fed President Bullard?  Wow!  This would be the unexpected.  If the surprising strength in new home sales is a reliable indicator as cycles past, perhaps Bullard’s view is not as suspect as many suggest.

What will today’s Durable Goods data suggest?  Typically rising home sales correlate positive to rising durable goods orders, orders including with and without autos.

Last night the foreign markets were mixed.  London was down 0.11%, Paris down 0.74% and Frankfurt down 0.60%.  Japan was up 0.17% and Hang Sang up 0.53%.

The Dow should open flat.  There are several high profile merger announcements this morning which may influence trading.

Friday the initial estimate of first quarter growth is posted.  Consensus is expecting a 2.2% growth rate but most will look at the momentum and inflation indicators in an attempt to determine if growth is indeed accelerating to a 3% handle, a level that may suggest a change in monetary policy.  To write the incredibly obvious, the Fed and monetary policy are in the proverbial driver’s seat.

The 10-year is up 3/32 to yield 1.86%.

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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.