Equities rebounded as the President insisted a trade deal with China is still within reach.  Oil also advanced on the headlines.  Some however wrote the 1.3% gain was the result of drone strikes on two pump houses of a Saudi pipeline.

Most seasoned participants would write a geopolitical premium is virtually absent in the oil markets.  Based upon firsthand experience, I agree. I will also write a premium can evolve overnight if an unexpected politically charged event or disruption occurs.

Today most embrace the view a surplus can return at any moment given the 2014-15 unexpected and greatest collapse of oil prices in a generation.  All must remember thirty days before prices began their fall consensus was adamant about “peak oil” and prices would never decline $100 barrel.

The markets are infamous of going from one extreme to another.  As stated above perhaps the only certainty that I can write that if there is a major disruption in oil supplies, a large geopolitical premium could immediately occur.

If such does occur, the economic and market narrative could radically change.

What will happen today?

Last night the foreign markets were mixed.  London was down 0.04%,  Paris down 0.31% and Frankfurt down 0.42%.  China was up 1.91%, Japan up 0.58%  and Hang Sang up 0.52%.

The Dow should open nominally lower for well-known concerns of trade, earnings and economic activity. The 10-year is up 8/32 to yield 2.38%.


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.