When will it end? In some regards the markets have lost faith in the central banks. As widely accepted the global central banks have been doing all the heavy lifting during the last 7-8 years while governments have been paralyzed because of intense polarization.
Domestically the data is “moderate.” Will it weaken? If it does not, many issues will advance considerably as a major recession has already been discounted. Discussing recent data releases are meaningless given the one way dominating narrative.
Typically markets bottom when all believe the status quo will continue and become progressively worse. Fear is more powerful than greed.
Based upon the above parameters, a case can be made prices are approaching a nadir.
Late yesterday afternoon the WSJ reported that OPEC via UAE is ready to cooperate on a production cut. Equity prices reduced their losses by around 50% but equites then again sold off under the premise that it is the UAE making these comments not Saudi Arabia. Oils losses were greatly pared.
As note, many are concerned of a market implosion creating the next financial crisis. I think the odds are equal that the next financial crisis may be the result of a market melt up that threatens the integrity of a money center bank. Wow!! This is a radical thought!
Several times I referenced a Barclay’s Bank report stating their concerns that naked shorts may create a “failure to deliver crisis.” The result is the same as an implosion such as the ones like Drexel Burnham, LTCM, Enron, WorldCom, MF Global, to name a few but only in reverse.
Will this view become prophetic? Always expect the unexpected.
Last night the foreign markets were mixed. London was up 1.70%, Paris up 1.18% and Frankfurt up 1.51%. China was closed for the New Year, Japan was down 4.84% and Hang Sang down 1.22%.
The Dow should open moderately higher as shares are vastly oversold as markets are vastly oversold as averages are around levels 2 years ago with many “must own” sub-indices down 35%-40% in about 6 months. The 10-year is down 5/32.
WHEN WILL IT END??!!
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.
