The market has retraced its March lows. The issue at hand, according to Goldman 61% of this retracement is the result of only five stocks. Most have opined that today’s market is the most imbalanced in history where the averages itself may contain unprecedented risk given the massive concentration of wealth in just a few names.

Three weeks ago, Goldman wrote the five largest companies now represents 26% of the S & P 500 and if these five largest stocks stumble in aggregate by 10%, in order to keep the market trading flat from current levels, Goldman write the bottom 100 S & P 500 stocks would have to rally by a collective 90%.

Wow! This is a great risk reward ratio. Thirty-five years ago, a basic premise for out performance is buying the under owned and under valued company. Data point after data point supports the record discrepancy between growth and value.

There will be a change but the question is as too when. Fortunes will be made and lost in this transition.

Radically changing topics, House Leader Pelosi stated yesterday the House may favor a “trimmed down” stimulus to around $1 trillion versus the $3.5 trillion package already passed by the House. Pelosi stated she would then come back in November and ask for more.

There was little reaction to this proposal.

Speaking of politics, there was little reaction or comments about the first night of the Democratic Convention. According to Bloomberg, TV viewership is down over 51% from four year ago levels.

As discussed yesterday, the potential depth of Biden’s support could be discovered based on the size of the post-convention bounce in the polls.

A question at hand is whether or not the incessive negative reporting about the President will help or hurt the post-convention Biden bounce.

According to the Media Research Center, from June through July 31 the three major networks made 668 evaluative statements about the President. 632 or 95% were negative and only 34 or 5% were positive. There was 512 minutes of airtime focused on Trump and 58 minutes about Biden.

Regardless of one’s political views, what new can be said about the President?

As noted many times, the differences between the candidate’s proposals are gargantuan but I must write the country is bigger than one person.

What will happen today?

Last night the foreign markets were up. London was up 0.20% Paris up 0.10% and Frankfurt up 0.24%. China was down 1.26%, Japan up 0.26% and Hang Sang down 0.74%.

The Dow should open flat. Mega sized retailers are posting stronger than expected earnings, perhaps the result that most of the smaller brethren were forced to close because of the COVID lookdowns. The 10-year is up 6/32 to yield 0.65%.


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.