Change is the only certainty.  BlackRock stated yesterday that its “monster” $16 billion momentum factor fund will see “an astounding” 68% of its portfolio change in order to hold the market’s top performers over the past year.  The transition will favor value shares over tech shares, the inverse of the last eight years.

The rebalancing will cause technology to slide to 17% from about 40% of the portfolio and financials go to about a third from less 2%.  Energy will go from 0.00% to about 4%.


Bloomberg writes there is about $1.4 trillion in momentum driven funds, suggesting the BlackRock transition might not be a one-off event given that value has outperformed growth for a third straight quarter, the worst run for growth since the 2013 inception of this type of fund.

Speaking of change, yesterday according to the financial blog “FINSUM” which bills itself at the market leader in financial news summaries and largest news site for financial advisors, FINSUM writes the Biden Administration is proposing an increase in capital gains tax to 43.4% from 23.8%.

While this proposal is nothing new, what is disconcerting and is new, according to FINSUM it will take effect May 27th and perhaps be retroactive.

Wow!  I have no idea if this is constitutionally possible given that any spending bills must originate in the House.  However, with this written, this is potentially a huge shock.  It would not give anyone an opportunity to plan around such a gargantuan change.

Other parts of his budget which according to FINSUM that will be announced on May 27 will be the end of the stepped cost basis, the reduction of the inheritance down to $1 million, the end of the popular 1031 real estate transaction, and the increase of the corporate tax rate to 28% from 21%, all of which has been earlier proposed or discussed.

Last week Treasury Secretary Yellen proposed a “minimum global tax rate” of 15% to “level out the playing field so one country does not have an advantage over another country via tax rates.”  Yellen also commented it would help in overcoming global economic inequality.    Many believe the odds of such being globally legislated as extremely tough but it is yet another indicator as to how the environment is potentially radically changing.

Commenting about yesterday’s market activity, technology led gains in equities as inflation anxiety appeared to be easing.  Bitcoin surged following a weekend rout.  Treasuries were relatively lower in yield.

Last night the foreign markets were up.  London was down 0.02%, Paris up 0.19% and Frankfurt up 0.79%.  China was up 2.40%, Japan up 0.67% and Hang Seng up 1.75%.

The Dow should open nominally higher as several Fed officials again downplayed the risks of persistent inflation.   The 10-year is up 2/32 to yield 1.59%.


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.