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Today is Election Day.

Today is Election Day.  I am certain many will form diametrically diverse conclusions about the outcome.  As penned many times to ignore Washington is equivalent to ignoring interest rates and earnings.

I have opined often progressivism is not a viable political agenda in the US given our culture and heritage.  Yes there have been times where the country has experimented with progressivism, all of which ended in spectacular failure because of “our can due” society that believes the individual is the path to success not the government.

As I wrote yesterday, there is a possibility the President may set a record that no President would like to make…the greatest number of seats his party lost during an Administration.  There is also a strong probability the President my usher in the greatest number of Republican House members ever in history

Is this a trashing of Progressivism or the President’s agenda, both of which are intractably related?  Perhaps a very damning indictment of the President is according to Politico only 10% of Republicans and Independents “like” the President versus 35% in 2012.

All must remember the President was reelected on his “likeability and credibility” not his economic policies.  As the President himself stated, today’s election is an election about his agenda and policies.  The subjective fluff is gone.

I will again write if there is yet another change of power, the odds of meaningful Congressional tax, entitlement, and debt reform rises exponentially, all of which should increase confidence.

Every sentiment survey cites fear of government is a major reason why confidence is lacking, which in turn is a major reason why demand is soft.

QE has exponentially increased liquidity but this liquidity has not increased demand or prices based upon the accepted metrics.  It is now a publically stated goal of all Central Banks is to increase demand pull inflation.

As noted yesterday, this is potentially a dangerous goal for once the proverbial inflationary genie is out of the bottle, it is difficult for her to return and the unintended consequences are infinite.

Western economies are asset driven defined as borrowing money today and pay back these funds with tomorrow’s dollars with the asset as collateral, collateral rising in value because of inflation.  Like eating fried chicken, a little bit of fried chicken is good but too much of bad thing is bad as inflation devastates individual’s purchasing power.

Like most, tonight I will be watching the returns.  Will the election increase confidence and the rekindling of the proverbial animal spirits?  If the sentiment surveys and current polls are correct, I would argue yes.

Commenting about yesterday’s market activity, all markets were relatively quiet with all talking about today’s election.  Tomorrow the topic will be the outcome of the election and Thursday the upcoming BLS monthly labor report released Friday.

Last night the foreign markets were mixed.  London was down 0.05%, Paris down 0.11%  and Frankfurt up 0.23%.  Japan was up 2.73% and Hang Sang down 0.29%.

The Dow should open nominally lower.  The 10-year is up 8/32 to yield 2.32%.

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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.