A HANDSOME ADVANCE

Led by energy, equities rose yesterday.  Exxon stated, “oil markets may be tight for up to five years largely the result of the lack of investment.”  As noted last week, in 2021 the oil industry only replaced 77% of oil used versus the historical 144% level.  XOM indicated it will “take time: for oil firms to “catch up” with the lack of infrastructure spending even with the most accommodative legislative environment.

Considerable attention has been focused on the cyber currency implosion. Bespoke Investments commented $2 trillion has been lost and CNBC reported the industry is now worth about a trillion.

Speaking of declines, little attention has been focused on Apple which has dropped in capitalization from over $3 trillion to about $2.1 trillion.  Wow!   The loss in one stock is about 50% of the loss in one industry.

The concentration of funds in one company/sector is suggesting a rebound back to the prior peak may be long.

I vividly recall 2000.  It took MSFT 17 years to recoup its losses and CSCO is still 46% below its 2000 value.

Will such again occur in the tech sector?  The tech sector is still worth 27% of the S & P 500 even following a 31% drubbing in the NASDAQ.  If one includes technology proxies such as AMZN and NFLX, tech is worth about 45% of the S & P 500 eclipsing the 35% level assuming similar boundaries achieved at the peak of the internet bubble of 2000.

Returning to the here and now, equities staged a strong 2.5% advance.  An obvious catalyst was not cited. Some suggested a short covering rally while others a rebound from vastly oversold conditions.

Bloomberg stated yesterday, last week 43% of the S & P 500 hit new 52 week lows the most since the pandemic selloff in March 2020.  Last week 97% of the S & P 500 closed lower for the week.

Ouch!

What will happen today?

Last night the foreign markets were down.  London was down 1.41%, Paris down 1.67% and Frankfurt down 1.95%.  China was down 1.20%, Japan down 0.37% and Hang Seng down 2.56%.

Dow and NASDAQ futures are down 1.0% and 1.50%, respectively on the “hard landing” scenario.   Oil is off about 4.5%.  The 10-year is up 22/32 to yield 3.20%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. 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. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.