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The election is two weeks away.  Many believe Hillary Clinton will be the forty fifth president.  There is also a growing minority opining there may be a Brexit like surprise given the many similarities.

To refresh, Brexit eve the polls suggested it would fail between 5% and 7%.  It passed overwhelmingly the result of the political, media and business establishment misjudging the mood of society.

I ask however did the establishment misjudge the mood or was the establishment suffering from the Tariq Aziz syndrome, the infamous Iraqi foreign minister who stated the Americans are nowhere near the Bagdad airport as American armor passed in the background, the classic case of believe what I say not what you see or feel?

As noted many times, a record 76% believe the country is going in the wrong direction.  There is a record 14% gap as to what candidate would be best for the economy.  Only 9% of society has a favorable view of congress, also a record low. And then there is the media where only 10% think they are accurate and unbiased.  And then there is the democratic candidate where only 11% thinks she is “honest and trustworthy.”

Against this backdrop, perhaps the political, media and business establishment is suffering from the Tariq Aziz syndrome.

We will know on November 9.

Volume in the market has been anemic.  The WSJ writes daily activity since October 10 in 19% below its 2016 average.  Is the dearth of activity the result of the election?  Wall Street thinks there is only an 18% chance Trump will be elected.  Is it because of earnings and interest rates?  These variables are always present.

Or can I suggest all are exhausted from the last several years where reality has uncoupled from fundamentals where the big just bigger and the small has little interest.  But I think it is noteworthy the best performing equity asset sector has been small cap value, a sector that no one owns, where any buying will boost prices.

What will happen this week?  Earnings may dominate the headlines as over 200 S & P 500 companies post results.  The economic calendar consists of various housing statistics, the trade gap, the first print of third quarter GDP, and durable good orders.

Last night the foreign markets were up.  London was up 0.15%, Paris up 0.81% and Frankfurt up 0.89%.  China was up 0.86%, Japan up 0.29%and Hang Sang up 0.98%.

The Dow should open moderately higher on several high profile mergers.  Bloomberg writes the S & P 500 has been stuck in a 64 point trading range since early August. The 10-year is unchanged at 1.74%.

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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.