Advisor Login Contact Us

Monies Ultimately will Gravitate to Sectors Where There Potentially Less Risk and Greater Reward.

Markets viewed April’s jobs data positively erasing the week’s decline.  The report helped mollify bond investors as yields on Treasuries have surged during the last two weeks on oil’s unrelenting advance to over $60/barrel.

Will the advance continue or will the markets retreat?

Bloomberg writes the S & P 500 is trading within its tightest trading range to start a year in almost a decade: roughly 125 points.  The peak to trough move of 6.3% is the smallest at this point of any year since 2006 reports Bloomberg.

I can make an argument the averages will remain in a narrow range but a major rotation can occur into equities that do not dominate the indices.   There are several reports suggesting the difference between the valuations of large cap behemoths that dominate the averages and the typical stock has not been this great for almost a thirty five years.

Monies ultimately will gravitate to sectors where there potentially less risk and greater reward.

Regarding the rout in Treasuries, I believe the 30 year will continue to rise in yield to around 3.50%, the result of rising commodity prices.

As I noted last week, commodities are underweighted in most accounts.  I think oil will continue its advance to around $70 by mid third quarter for one simple reason.  OPEC, who supplies 50% of the world’s energy needs, a NGO dominated by Saudi Arabia that is about 25% of global production, has stated its intentions to have oil over $70 by this juncture.

What will happen this week?  Earning season is almost over.  Results were essentially flat for the quarter.  Analysts had expected profits to decline.  The economic calendar is comprised of various inflation and consumer sales data.  Has the rise in crude impacted both?

This week can be interesting.

Last night the foreign markets were mixed.  London was up 0.11%, Paris down 1.60% and Frankfurt down 0.28%.  Japan was up 1.25% and Hang Sang up 0.51%.

The Dow should open flat.  The 10-year is off 6/32 to yield 2.17%.

Return To Index Page
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.