AN ECONOMIC AND VIRUS INDUCED ADVANCE

Will tomorrow’s BLS labor report confirm the incredible strength in the ADP Private Employment Survey?  ADP indicated that in January private employers added the greatest number of workers since May 2015.  The data was almost two times greater than anticipated.  Moreover, and perhaps even more significant December’s data was revised higher thus indicating the strength might not be a one-off event.

The question at hand is whether or not this data will be discounted as it was “pre-coronavirus.”

Speaking of strength, Gallup reported yesterday that economic optimism is at a 44-year high, partially the result job market strength.

In my view the political implications of a strong job market are huge.  Contrary to what some are writing, elections are all about the pocket book.  Social issues have and always will be second tier.   Employment is huge in so many dimensions from feelings of self-worth to security.

Psychology 101 states self-esteem is earned, not given.  All remember their hardest teachers or toughest coaches.  All feel good about oneself when something of meaning is accomplished.

I think society is at this point, that the majority is proud of their accomplishment, a key variable as to why the greatest proportion of Americans are optimistic in 44 years.

Commenting about yesterday’s market activity, equities rose on economic optimism and speculation that the coronavirus will be contained.  Oil surged over 3% after falling almost 20% in five days.

Speaking of tumbling, Tesla declined over 17 % yesterday as most of Wall Street are struggling to identify a reason for the company’s incredible 6-day 60% surge, the vast majority came during the prior two days.  Will the selloff continue?

Many years ago before all became technical analysts I was introduced to the 90/90 Rule.  This rule states there is a 90% probability that 90% of a parabolic move will be reversed but the question is at what level?   Is this rule still valid?

All must remember times are never different, there are just different people.

Last night the foreign markets were up.   London was up 0.42%, Paris up 0.67% and Frankfurt up 0.74%.  China was up 1.72%,  Japan up 2.38% and Hang Sang up 2.64%.

The Dow should open nominally higher as China’s plans for tariff cuts on American imports added to optimism the global economy will weather the hit from the coronavirus.  The 10-year is unchanged at 1.64%.

kent
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.