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Today is Election Day.   There will not be a shortage of opinions about the outcome.  I have framed today as a battle between the economy and the traditional outcome of midterms amplified by the anathema of President by the Establishment

To refresh all historically voters vote their pocket book.  Also historically there have only been two times in 21 midterms the party of the incumbent did not lose seats…1932 and 2002.  Historically there is a loss of 30 House seats and 4 Senate seats for the incumbent.

I have opined economics is a stronger force than a 91% historical precedence in suggesting a political outcome, the non-consensus view.   All will know the answer by this time tomorrow.

Commenting about yesterday’s market action, technology continued its slide on reports that Apple will not boost iPhone construction. Oil advanced on Iranian sanctions as did the financials…aka the value shares.

Treasuries closed nominally lower in yield.

Changing topics, many times I have commented about the breakdown of the vast majority of trading strategies.  According to Deutsche Bank, a whopping 89% of assets have handed investors losses in US dollar terms in 2018, more than any previous year going back to 1901.

Wow!  Could we make the assumptions that today’s financial alchemy which has entirely dominated the financial landscape is just that…alchemy?  There is no place to hide.

I have contended for many years the markets are imbalanced where this relentless push to lower execution expenses and increased the speed of execution is a detriment to all, sacrificing liquidity and capitalization necessary for efficient markets.

Unfortunately it will take a crisis to challenge trading mechanics.  Hopefully this time it will be different.

Last night the foreign markets were mixed.  London was down 0.59%, Paris down 0.20% and Frankfurt down 0.13%.  China was down 0.23%, Japan up 1.14%  and Hang Sang up 0.72%.

The Dow should open nervously lower with all eyes on the election.  Tomorrow attention will be focused on the infinite number of outcomes because of the election, the commencement of the two day Fed meeting and the upcoming G-20 meeting where the odds of a trade deal changes almost hourly.  The 10-year is up 2/32 to yield 3.20%.

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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.