Many times I have commented about the narrowness of the market.  Bloomberg quantified this lack of breadth on Friday.  The newswire stated Thursday was the third time this year that the number of decliners was least 400 more than gainers when the NASDAQ was up at least 0.5%.  Prior to 2019 it had only happened four times since 2010—a sign of deeper and deeper concentration of size and equity weightings.

Wow!  Historically such concentrations indicate a market top.  However with this written, as evidenced by the 200 day moving average which is flat since July 2018, a case can be made the market has already reached an apex.  I am not aware of another time that such has occurred.

Before Vanguard’s Bogle’s death, he commented that the annual return of the popular 60% 40% stock bond portfolio would be around 1.5% for the next 10 years, the result of concentration of funds in a few stocks and record low interest rates. Bogle also commented individual shares could outperform as monies rotate from the concentrated issues into the lesser owned shares.

Wednesday is a FOMC meeting.  At the time of this writing, the markets are suggesting a 90% chance of another reduction, the third of the year.  Last year at this time, it was widely expected the Central Bank would increase rates 2-4 times.

As widely noted trade is blamed for the massive change in sentiment.  While recent data has suggested some slowing, the economy is still stronger than its annual growth rate from 2008-16.

There have been some suggestions the market (and the President) has bullied the Fed into acting, believing equities would crater if no action is taken.

I don’t know how to respond to this view other than to write trade issues has and will continue to have a greater impact upon the technology sector given supply chains and the like.

The news now emanates from the West Coast, a point Facebook likes to make for as according to the company 72% of Americans now get their news from this social media giant.  Can we make an argument there is no interest like self-interest?  It is not what one writes but rather why one writes it?

The technology sector et.al. is getting hurt by trade, a point evidenced by an annual decline in both revenues and profits of this sector.

As inferred above, this week can potentially be a “big week” given the plethora of top tier events and economic releases.  As stated there is a FOMC meeting, but also released is trade data, a confidence survey, third quarter GDP,  the ISM and the October’s labor report.  All can have a considerable impact upon psychology and the markets.

Also occurring this week is four of the largest seven companies in the S & P 500 report earnings.  As noted several times, earnings released to date have been mixed.

I must write that in other past “big weeks,” such have proven out to be duds.

Last night the foreign markets were up.  London was down 0.04%, Paris up 0.13% and Frankfurt up 0.44%.  China was up 0.85%, Japan up 0.30% and Hang Sang up 0.84%.

The Dow should open mixed.  The 10-year is off 10/32 to yield 1.84%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect 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 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. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.