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What will be the Next Major Market Narrative?

What will be the next major market narrative?  An argument can be made Greece and the potential change in US monetary policy is not as significant as they once were.  There was little market reaction—defined as volatility greater than 5%–with each of the above.  Yes the markets did trade on the news and the anticipation of such, but the veracity and velocity of such paled in comparison as to market reaction to each of the above in years past.

Will it be rising oil, the effect of a chaotic Middle East?  What??   Consensus view is for oil to reverse its rising tide.

Will it be greater than expected economic growth that increase demand pull inflation?  What???  This is even more ludicrous than oil staging a significant rebound.

Or will it be individual sectors greatly outperforming the general indices, the inverse of the last 10-12 months where according to Bloomberg and CNBC the markets is as myopic as 2000.

[Note:  CNBC stated yesterday the NASDAQ 100 would be down considerably if five stocks were eliminated from this index.   Bloomberg wrote at the end of January the “typical” stock is down about 23%]

In my view the odds of three occurring above are over 50%.  The Middle East is in anarchy as there are Muslim countries bombing Muslim countries, the result of the atrocities committed by ISIS.

There are number of countries that already have negative interest rates and JP Morgan was the latest money center bank who will begin charging large depositors a surcharge to hold their deposits.  Will this force companies to begin expanding?

Regarding market performance, referencing 2000, individual sectors greatly outperformed following the tech implosion that crushed the NASDAQ.

Returning to the here and now, markets were relatively quiet. Today the CPI, Durable Goods Orders, a home price index and weekly jobless claims are released.  Will the data impact trading?

Last night the foreign markets were up. London was flat, Paris up 0.20% and Frankfurt up 0.35%.  Japan was down 1.08% and Hang Sang up 0.50%.

The Dow should open quiet following two days of Congressional testimony by FRB Chair Yellen that inflation and wage growth remain too low for the central bank to raise rates at its next meeting.  The 10-year is up 7/32 to yield 1.95%.

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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.