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Wow!  What else can I write?  Friday I left for a meeting just as the news was breaking.  Perhaps the only the comment I will write it has to be something of great significance given the time before the election, knowing that such news could alter the outcome.

No one can make today’s political up, giving great credence to the view that life is indeed stranger than fiction.

Markets hate uncertainty and a strong argument can be made the next eight days could be the “mother of all uncertainties” given the stark differences between the two candidates.  As opined on Friday, it is The People versus The Establishment.   Many are now stating next Tuesday’s outcome is “fluid.”

Not only is there election, there is Fed meeting on Wednesday. Few expect a change in monetary policy but most are anticipating language that December is all but a done deal.  And then there is October labor report posted on Friday and the continual stream of earnings.

Wow!  Maybe the rather tranquility of the 10 weeks will be shattered.

I have little comment about the initial estimates of third quarter growth.  The economy expanded by 2.9%, the greatest growth in two years.   Growth was led by an expansion in inventories, the first such occurrence since early 2015, and a soybean related jump in exports. Exports added the most to GDP since the final three months of 2013.

Consumer spending rose a less than projected, at a 2.1% rate versus a 4.3% pace registered in the second quarter.

Corporate investment in equipment declined for a fourth straight quarter, the longest such stretch of the current expansion.

Generally speaking, the data suggested the economy is still limping along but still not entered the illusive escape velocity inflection point.

I have received considerable feedback about my ETF opinions.  Bloomberg commented Friday that “Apple is the tail wagging the dog for many technology ETFs.”  The Select Sector Technology ETF (XLK) now has a 14% weighting in Apple, up from 8% in 2009.  That been good for seven years as Apple is responsible for about 32% of XLK’s total return during this peered, almost three times greater than the contribution of any other stock.

Bloomberg stated the obvious.  It is great while going up but can crush the ETF in a down market, shattering the myth low cost diversification myth.

Speaking of concentrations, four of the five largest stocks in the S & P 500 is technology.  Apple in first, Alphabet is second and Microsoft and Face Book is number four and five, respectively.

The combined capitalization of these four companies is about $2.1 trillion.  The S & P 500 is worth about $18.5 trillion thus suggesting a record 11.3% of this benchmark is comprised of only four companies.

Wow!  What happening if selling commences?  Perhaps AMZN’s 5% earnings decline is a harbinger of things to come.

Last night the foreign markets were down.  London was down 0.43%, Paris down 0.64% and Frankfurt down 0.23%.  China was down 0.12%, Japan down 0.12% and Hang Sang down 0.09%.

The Dow should open flat ahead of a data filled week, a week that has Fed meeting, a plethora of earnings reports and the election.  The 10-year is up 2/32 to yield 1.84%.

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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.