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Market Commentary Equities were relatively quiet yesterday Equities were relatively quiet yesterday but the long end of the treasury market was crushed partially predicated by the ADP Private Employment Survey that posted the smallest job loss since March 2008. Tomorrow the all inclusive December employment data is released and consensus is expecting no change for December’s nonfarm payrolls. This would be the first month in 23 that the economy did not lose jobs assuming no major revisions in November’s data. There has been a chorus of Fed officials stating the overnight rate will remain low for an “extended period of time.” It is against this backdrop—potential job creation and an extremely accommodative monetary policy—the long end of the bond market is concerned about inflationary growth. Wow! What a statement. Is not deflation the primary concern? The treasury market is suggesting something different given the massive amount of stimulus in the financial system. As noted the other day Fed Funds targeted around 3% is still stimulative, considerably below the accepted “equilibrium” rate of 5%. As widely known today’s target is between 0.00% and 0.25%. I think the odds are greater than 50% monetary policy will be dramatically altered by February 15. By this time there could be a distinct possibility the data would have stated jobs creation ofr three consecutive months and that the economy expanded by a mid “five handle” in the fourth quarter. Radical, yes but consistent with this crisis where the velocity of change has been incredible where the unexpected has occurred. What will happen today? The data point are weekly jobless claims are released at Last night the foreign markets were down. The Dow should open nominally lower after The information is the personal views of Kent Engelke and is not necessarily indicative of those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed here 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. Capitol Securities Management, Inc. is a Mid-Atlantic based, privately owned brokerage and investment firm with branch offices in Mclean and Richmond, VA, Boston MA, Hickory, NC, Florham Park, NJ and Tampa, FL. Capitol employs over 170 fulltime investment professionals and independent affiliates in locations from New England to Florida and has been serving the needs of its investors for over 25 years. It is a member of FINRA and SIPC. © Copyright 2008 Capitol Securities, Inc. All Rights Reserved. |
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