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The US is the Only Country Considering Rising Rates Because of Growth, a Major Factor as to Why the Dollar is so Strong.

Equities were strong because of oil.  What?  Did I not write yesterday equities closed quietly lower because of a sharp decline in oil?  The volatility in oil is incredible.  Is this the result of even greater geopolitical tensions in both Russia and the Middle East?

Equities were also boosted by a high profile merger and perhaps the ECB’s strong stance towards Greece.  Can it be suggested the ECB believes a possible Greek implosion will be a nonevent, partially the result of its massive QE program announced 2 weeks ago?

Speaking of QE, the US trade deficit rose to its highest level in over two years as imports surged, the result of a declining dollar.  It appears the entire developed and developing world has embarked upon some version of QE or lowered interest rates; the net effect creates a falling currency against the dollar.  Such a currency enables cheaper imports to the US.

I have never abandoned the stance that the US is the proverbial engine of global growth.  Can we suggest that this engine is back in full strength because of currency relationships and the US has the highest relative growth rate, hence able to purchase foreign goods?

I believe it is noteworthy to write the US is the only country considering rising rates because of growth, a major factor as to why the dollar is so strong.

Speaking of strength, today January’s employment data is released.  Analysts expect an increase of 230K non-farm and 223K private sectors payrolls.  The unemployment level is expected to be 5.6%, a 0.3% increase in average hourly earnings and a 34.6 average work week. Will there be an increase in the labor participation rate from an approximate thirty year low of 62.7%?

As written many times, I can argue the vast majority of the decline in the unemployment rate is the result of workers leaving the work force.

Last night the foreign markets were down.  London was down 0.27%, Paris down 0.37% and Frankfurt down 0.69%.  Japan was up 0.82% and Hang Sang down 0.35%.

The Dow should open quietly higher but his could change radically given the significance of the today’s labor report.  Oil is currently higher. The 10-year is up 1/32 to yield 1.82%.

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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.