In my view the relentless rally in companies considered to be havens from the virus is now at manic proportions. Ownership is crowded and valuations are so stretched, any event could cause the proverbial Jenga tower to topple.

The recovery is V shaped but some are suggesting the economic rebound will soon falter because of rising virus cases.  I do not agree with this premise.

As noted many times money supply is growing at an unprecedented rate.  This money is finding a home in both the greatest capitalized momentum issues and the real economy.  I think the odds are greater than 50% the economy will soon face inflationary pressures, where Main Street will outperform Wall Street.

Some would suggest that this is an improbable scenario but if we “follow the science,” such is the expected norm, not a one-off event.

I will argue rising interest could be the proverbial event that topples the Jenga tower.  Again, if precedent is of any guide, all major market selloffs since 2008 was interest rate/monetary policy inspired.

What will happen today?

Last night the foreign markets were down.  London was down 1.23%, Paris down 0.94% and Frankfurt down 1.07%.  China was up 0.37%,  Japan down 0.44%  and Hang Sang down 1.38%.

The Dow should open moderately lower on concerns the recovery will take longer than expected.  The 10-year is unchanged at 0.68%.


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.