There is little I can write about yesterday’s market action. The narrative yesterday was much of the same…concerns of deflation in China causing raw material shares to fall while there were gains in the consumer and health care issues, issues that faced selling for a myriad of reasons including the potential impact of a rising dollar. Oil rose nominally as some are beginning to accept the possibility that infrastructure spending may have been cut too dramatically.
What will be the next catalyst? Earning season is coming to an end with results posting a 3.8% decline versus the 7.2% expected drop. Seventy four percent beat profit expectations while 56% missed sales estimates.
The Fed meeting is not for another four weeks. Will rising rates be a profit driver? What??? Is this not in direct contradiction of Finance 101?
Cash on balance sheets is gargantuan, earning no interest and in some instance may be charged a “deposit fee.” Any uptick in rates will increase the income on these balances.
The hallmark of the last seven years is to expect the unexpected and the velocity of change. Three weeks ago few had thought a change in monetary policy would occur before March 2016. Consensus is now expecting a 0.25% increase. Typically when rates first are increased, markets fall given that interest rates are the biggest variable of most valuation models.
Will the beginning of the inevitable tightening cycle produce a different result given that cash has now become a new profit center?
What will happen today, Veterans Day? Most markets are closed.
I ask all too personally thank any Veteran that they know for without them we could not live our lifestyle. Yes we have our issues but because of the selfless sacrifice of a select few we can openly discuss these issues free of most retribution, a discussion that at times is fraught with vitriol.
Last night the foreign markets were up. London was up 0.56%, Paris up 1.08% and Frankfurt up 1.36%. China was up 0.27%, Japan up 0.10% and Hang Sang down 0.22%.
The Dow should open moderately higher on trading that could be perhaps muted because of the holiday. The Treasury market is closed.
THANK YOU VETERANS!!
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.
