A SEVEN PERCENT PLUNGE

Equities slumped over 7%, the most in 12 weeks as economic jitters returned. The selloff was huge as Bloomberg writes a record of all but 1 S & P 500 stocks fell. To further emphasize the breadth of the selloff, at one time the number of stocks falling on the NYSE exceeded those rising by 2,058, sending the NYSE Tick Index to a record low.

As widely discussed the markets are entirely dominated by momentum-based trading, amplified by the greatest surge of retail day traders in history. Bloomberg writes on line retail traders has surged three-fold since March and are now exceed levels of those experienced during the dot.com years of 1999-2000.

The accepted catalyst for the selloff was a possible second wave of the pandemic and a less than optimistic outlook from Fed Chairman Powell. Positive vaccine news was ignored. I will also argue equities were also spooked by a stronger than anticipated inflation report, a report that in some regards was 400% stronger than expected.

As noted yesterday, the Committee announced its intentions to keep short term interest rates at 0.0% through 2022.  Will this pronouncement become an issue?

Radically changing topics, polls are suggesting 72% of the country is supporting the protestors. The same polls state that 80% oppose looting, vandalism and riots. Many confederate statutes have been torn down.

Moreover, several Christopher Columbus statutes have been destroyed [Note: I live in Richmond, a city that has several infamous statutes, most of which has been vandalized or destroyed]

To some, these statutes represent slavery and oppression and must be exorcised.

As noted many times, the markets are top heavy, dominated by a several mega sized technology companies, companies that have massive production facilities in China, a country that is widely accepted still utilizes slave labor.

Is this not a contradiction of protestors using an Apple phone built by indentured Chinese minorities filming the destruction of statues of confederate generals, statues that many claim represent a stain upon the country and the world?

Is this not disingenuous? I ask does anyone else see the hypocrisy? Why are we not protesting and boycotting Apple or Nike that have massive Chinese production facilities?

I am one of those 72% who support peaceful protests for I too am angry about the long arm of government and bureaucratic fiat. Too me there is little difference between being bullied by a pen or by a Billy club. I am extremely empathetic to the claim of many “I did not do anything and you are still harassing me.”

I am also one of the 80% who opposes violence, vandalism and looting. It does nothing to advance a cause.

Government has become to powerful. Our elected officials are here to serve. We are not expected to serve them.

Today changes are tectonic and will have a massive impact on society, the economy and the markets.

What will happen today?

Last night the foreign markets were mixed. London was up 1.25%, Paris up 2.14% and Frankfurt up 1.17%. China was down 0.02%, Japan down 0.75% and Hang Sang up 0.73%.

The Dow should open about 2% higher following yesterday’s plunge. The 10-year is off 12/32 to yield 0.72%.

 

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.