Stocks quietly rose yesterday amid optimism that tension between Russia and Ukraine will ease and American airstrikes will push back militants in Iraq. The question at hand are geopolitical risks waning or is this just a pause. Obviously all hope the former.
Many have been stating a correction is needed and have suggested one was in the offing. The S & P 500 has fallen about 3.9% from its apex. As I wrote last week, ifwe have just experienced the much talked about correction, this has been the most painless correction in history.
Reiterating a major reason why I cannot become bearish is the massive amount of cash searching for a more efficient use. Every data point suggests cash balances are massive, the ratio of productive assets to cash is at an all-time low and for the exception of the government, corporate and personal balance sheets have delevered considerably.
Crisis and bear markets typically occur in the inverse environment…growing debt and strong optimism.
There is little on today’s economic calendar thus trading may be dictated by geopolitical headlines which are typically “fluid” in an environment similar to that of today. The possible outcomes of war are infinite.
Last night the foreign markets were mixed. London was down 0.04%, Paris down 0.42% and Frankfurt down 0.39%. Japan was up 0.20% and Hang Sang up 0.18%.
The Dow should open nominally higher as all are starting to live and adopt to an uncertain geopolitical environment. The 10-year is off 1/32 to yield 2.43%.
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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.
