2019 will perhaps be regarded as the year the unexpected occurred.  Domestically the economic forecast for 2019 penned around this time last year was largely met but the response to it was largely unexpected given the consensus view changed to one of a forecasted contraction because of the trade war.

The overnight rate was reduced by 33% versus increasing 22%.  The 10-year Treasury fell in yield by 46% versus rising 23%.  Mega capitalized technology companies advanced over 43%, an advance that greatly skewed the market averages.

Wow!  Talk about discounting an event that had not occurred!

The question at hand is whether this discounting will unwind itself to today’s reality?

Speaking of a potential change in reality, oil shares have been decimated.  Apple is worth more than the S & P 500 oil index, an environment thought as incomprehensible as little as two years ago.

Last month Exxon warned of a pending tightness in supplies if not outright shortages given the lack of upstream infrastructure and the potential decline in American production.  Several government entities are still for casting between 750,000-1,000,000 barrel increase in 2020, an increase that oil industry executives think as nothing other than ludicrous given the lack of funds forcing a massive curtailment in capital expenditures.

Exxon states about 7% of oil reserves are used each year.  Reserves are only increasing at a 5.5%.  Will there be a sudden reversal in psychology?

Late last week, the Federal Reserve released the Beige Book or the statistical reference utilized at the upcoming FOMC meeting.  The Beige Book stated “the US economy expanded modestly through mid-November amid steady consumer spending and some brighter signs from manufacturers.”  It further stated the “economic picture remained quite positive for the exception of the energy sector which deteriorated modestly.”

Will this week’s economic calendar be interpreted in a similar manner?  It is crowded with top tier statistics such as the ISM, the ISM Non-Manufacturing Index, several employment reports including the BLS report and confidence surveys.

Last night the foreign markets were mixed.  London was up 0.02%,  Paris down 0.26%,and Frankfurt down 0.04%.  China was up 0.13% Japan up 1.01%  and Hang Sang up 0.37%.

The Dow should open nominally higher with all attention on trade.  The 10-year is off 16/32 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.