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It is election eve.  Simplistically explained, it is economic growth versus Presidential anathema from the Establishment and the Elites. What side will be the victor?  Perhaps the only certainty to write is the tactics that worked during the midterm will be replicated in the 2020 election.

If history is of any guise, economics will triumph as have been the case since the dawn of mankind.

Speaking of the economy, October’s jobs data was strong.  It surprised on almost every dimension.  Wages rose by 3.1%, the greatest increase since 2009.

The pivotal labor participation rate rose to 62.9% from 62.7% directly challenging the consensus view these workers have forever left the workforce for a myriad of reasons.  In my view the rising LPR and wages will create self-sustaining growth.

Because of a rising LPR, the unemployment rate remained unchanged at 3.7%, the result of an expanding workforce.

The data reinforced views of another interest rate hike in December, the intentions of such might be telegraphed at this week’s Fed meeting.

Speaking of the Fed meeting, will it begin warning the markets that sometime in 2019 the Committee will stop issuing forward guidance as was the case prior to 1994?

Commenting about Friday’s market activity, equities—led by technology because of Apple’s perceived earnings disappointment—traded lower.  The NASDAQ was off about 1.2%.  The S & P 500 and Dow declined about 0.50%.  Equity trading was also dominated by mixed trade messages.

Treasury yields rose across the spectrum because of the jobs data.  The yield on the 30-year surged to a level not seen since July 2014.  The 10-year is quickly approaching annual highs.

As noted last week, this week can be pivotal in determining the direction of the markets.  There is the election, a Fed meeting and possible trade deal at the G-20 meeting.

Last night the foreign markets were mixed.  London was up 0.51%, Paris up 0.25% and Frankfurt up 0.24%.  China was down 0.41%, Japan down 1.55%  and Hang Sang down 2.08%.

The Dow should open flat ahead of the midterms and the belief that a trade deal is off the table for now.   The 10-year is unchanged at 3.21%.

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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.