Reading yesterday’s headlines one can make a conclusion that an end of an era could be at hand.

One major headline read “We Missed the Exit: Banks step up Call to End Negative Interest Rates.”  A group of money center European banks are asking the ECB to reverse half a decade of negative interest rates stating such “is not a good place to be socially or economically.”   Euro banks are charged to deposit money at the ECB and such charges can not be made up via spreads.  Moreover, many savers—society—is being punished for rates below zero.

Another headline read “Index Fund Giants Draw Antitrust Scrutiny in the US.”  Scrutiny lies behind the growing power of BlackRock, Vanguard and State Street which collectively own about 22% of the typical S & P 500 company.  The concerns are anything from proxies to merger influence to squashing competition.

Another read “Is Tesla the Bubble’s Last Innings?”  The article was about the dominance of five companies in the capitalization of the S & P 500-over 18% versus the previous apex of 16.8% in 1999.  The 135% three month gain in Tesla—vaulting it to the second most valuable car company in the world—is being viewed possibility as nothing other than a climatic Fourth of July fireworks display.

And then perhaps the most incredible headline, one that goes against the common mantra of the last 12 years, a headline from Davos read “President Trump’s economic team is overheating the economy.”  The far-reaching article further stated “An overheated economy cannot be kept boiling for too long.”  The author is/was George Soros.

Wow!  Is the New Normal over?

In many regards the four headlines are interlinked for passive investing has assisted in creating a perceived bubble given the inherent structure where the big get bigger and the small get smaller, valuations stretched because of a low cost of capital the result of the New Normal.

It is often written the most obvious conclusions are those which are ignored.  It is not whether change will occur but rather when that change does occur and what is/was the catalyst.

Commenting about yesterday’s market activity, equities overcame early respiratory virus induced weakness to close essentially unchanged.  If history is of any guide, typically illness scares are short term events that are regarded as nothing other than noise.

What will happen today?

Last night the foreign markets were up. London was up 1.65%, Paris up 1.14% and Frankfurt up 1.50%.  China was closed for a holiday, Japan up 0.13% and Hang Sang up 0.15%.

The Dow should open flat as the markets are digesting the latest corporate news and impact about the respiratory virus.  The 10-year is off 1/32 to yield 1.74%.

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.