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Market Commentary Today housing and inflation data are released. Today housing and inflation data are released. How will this data be interpreted? If the data is stronger than expected how will it impact treasury prices? As per Bloomberg, next week the Treasury may sell an unprecedented $128 billion in notes which some believe might be the peak in issuance as the economy strengthens. At this juncture, primary dealers are estimating the Treasury will sell a record $2.4 trillion in debt in 2010 as compared to $2.11 trillion in 2009. Regarding 2011, Treasury has stated the obvious that 2011 issuance will be based upon tax receipts and projected budget. Will revenue and growth projections meet expectations? As written several times and as per the National Bureau of Economic Research, a tax increase of 1% of GDP lowers real GDP roughly 2% to 3%. In other words higher taxes lower GDP. Perhaps the only absolute is that taxes are going up next year. Will revenue assumptions meet expectations, especially given that as per the IRS a record 47% of society will not pay federal taxes in 2009? Never have so few carried the burden of so many. I reiterate my long held position that the economy is accelerating at a pace faster than most expect. However I am also fearful the strength of this recovery could be muted by the actions of As stated above existing home sales are released today. Sales are expected to rise by 5.2% in March as prices decline 0.2%. Housing is the epicenter of the current crisis and recent data has been mixed. What are the odds that missed sales in February be made up in March, perhaps amplified by the pending expiration of the home buyers tax credit? Other data released includes the Producer Price Index and Initial Jobless Claims, which too can affect trading. Last night the foreign markets were down. The Dow should open moderately lower on sovereign debt concerns. 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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