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FRB Chair Yellen’s remarks were of little impact.  However after Yellen spoke, the Vice Chair Fischer stated Yellen’s comments leave open the possibility of an interest rate hike in September, further stating her remarks are actually consistent with the possibility of two hikes this year.  Wow!  Talk about potential miss messaging or do these conflicting messages actually reflect today’s environment where no one rally has a clue of what might occur tomorrow?

As noted many times, the markets have become spoon fed by the Federal Reserve, believing that this august body is both omnipotent and omniscient.  Unfortunately for all the perceived sophisticated forecasting tools, the Fed’s forecasts are no more accurate than their private sector brethren.    Can I cynically suggest both the private and public sector attempt to validate each other’s views?

All want to know the future but unfortunately unless you meet Dr. Brown in his DeLorean, no one can accurately foretell tomorrow’s events.  Markets are people and people move markets, market movements based upon people’s emotions and the interpretations of such.

Friday the all-inclusive unemployment report is released.  Some think this report will be the deciding factor as to whether there is an increase in September.  I think Yellen et.al. has the preliminary findings of August’s survey and is perhaps a basis for the comments made by both.

As inferred above, equities were not overly responsive to Yellen’s remarks, perhaps rising an additional 25 points as she commenced speaking.  Equities then reversed direction on Fischer’s comments ending about 50 points lower.

As noted many times the markets are now entirely co-opted by algorithmic or technology based trading and insinuation of higher rates, equities will be met with selling.

What will happen this week?  The economic calendar is crowded with various employment surveys, manufacturing indices and confidence reports.

Last night the foreign markets were mixed.  London was up 0.31%, Paris down 0.83% and Frankfurt up 0.64%.  China was up 0.20%, Japan up 2.30% and Hang Sang down 0.38%.

The Dow should open flat with the averages heading for their first monthly decline since February with all waiting for more economic data to assess the timing of Federal Reserve rate increases.  The 10-year is up 4/32 to yield 1.62%.

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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.