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Equities rose as signs the US and China are closing in on a trade truce and stronger factory number boosted confidence in the global economy.  Commenting about factory orders, factory output expanded by the greatest amount in 10 months, which helped blunt concerns about the impact of the trade war and government shutdown.

Oil advanced over 3% on the trade news and from estimates of greater demand than expected, amplified by the news that OPEC’s production fell by the most in two years, a drop that occurred before the latest production agreement was implemented.  Saudi Arabia also reiterated its plans to cut more than it agreed to in the latest round of talks.

Will oil rebound as fast as it fell?  Crude plunged to $42 barrel on Christmas Eve day from $76 on October 3.  WTI closed around $53, up about 22% from its low.  This is the strongest start to the year since 2001

The volatility of change is frightening.  If supplies contract at a pace greater than anticipated, I would argue yes.

Earnings season accelerates this week.  To write the incredibly obvious, the markets may have an outsize response to any results that are different than expectations.

Last night the foreign markets were down.  London was down 0.49%, Paris down 0.53%, and Frankfurt down 0.46%.  China was down 1.18%, Japan down 0.47%, and Hang Sang down 0.70%.

The Dow should open moderately lower on economic and geopolitical concerns.   There are a multitude of presenters at the economic forum in Davos discussing the massive change that is occurring geopolitically, the impact of such is infinite.  Populism and economic nationalism is not waning as most had predicted.

The Establishment is being challenged and those who hold power and influence are frightened by their potential loss.  I would write it are the polices of interdependency and multipolarity, the proverbial one world order that has forgotten the common man is the primary issue at hand.  Voters throughout western democracies are rebelling against the bureaucratic state, a statement that is validated by recent electoral outcomes in Germany, Britain, France, Norway, Finland, Italy, etc.

A major issue at hand is market mechanics that have been created believing that yesterday will last into infinity.

The 10-year is up 8/32 to yield 2.78%.

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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.