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. 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. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.