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Market Commentary The markets are becoming more convinced the Goldman The markets are becoming more convinced the Goldman suit is a non event, political posturing to ensure the sustainability or approval of various regulatory entities or legislation. Stocks led by the financials rallied modestly as event risk is becoming less of a concern. Earnings have been great and as profitability increases the probability of default declines dramatically.
As noted several times, earnings are expected to rise for the second consecutive quarter, the first such occurrence since 2007. Forward looking statements have also been encouraging.
While I still think there is a strong probability equities could decline by 5%-7% in relative quick order, I am more convinced equities will end the year higher by 10%-12% given the strength of corporate profitability that should sustain the recovery.
As inferred above, I think interest rate will soon replace event risk as one of the two predominate concern of investors. The other and as discussed a gazillion times is political risk given the propensity of the current Administration to spend tax payers’ monies and the agenda that such behavior suggests.
The economic calendar is again sparse today however inflation, manufacturing and housing data is released tomorrow and Friday. At this juncture inflation is not viewed as a major threat, manufacturing is gaining strength and housing has bottomed but has not demonstrated any sustained strength.
What will happen to monetary assumptions if both existing and new home sales rise at a pace considerably greater than the consensus view? As written many times inventories are declining however sales are not rising at a dramatic pace keeping the pivotal inventory to sales (I/S) ratio at historically high levels. What are the odds of a large decline in the I/S ratio?
The consistency of this crisis is the unexpected occurring at a frightening pace.
Last night the foreign markets were down.
The Dow should open modestly lower as concerns over 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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