CPI AT 8:30

Markets were bifurcated in very volatile trading.  The tech heavy NASDAQ 100 outperformed yesterday.  Bloomberg writes over 50% of the NASDAQ is down over 50% for the year.  Goldman Sach’s list of the 25 most widely owned stocks is down an average of 52% YTD.

Continuing with the dour statistics, of the twenty-five most widely owned mutual funds in retirement accounts is down 23% with many marquee names posting declines more than 28% according to a Bloomberg wire report.

As widely discussed, inflation and corresponding higher interest rates is a primary reason for the decline amplified by intense concentration in a handful of names or sectors.  The lack of liquidity is very apparent.

Speaking of inflation, April’s CPI is posted at 830.  Analysts are expecting a 8.1% headline rate and a 6.0% ex food and energy.

Radically changing topics, VP Pence stated yesterday that activists via the ESG mantra are “weaponizing the financial system against companies and is hindering economic growth and increasing inflation.”

Amongst other things, Pence cited a proposal by the SEC that would require businesses to reveal the risk a warming planet poses to their operations when they file regulatory statements, something that is very difficult and subjective to delineate.

Several times I have referenced several ESG dominated bond indices that are/were down over 23%.  Several ESG stock funds/ETFs are off over 35%.  What is ironic the top performing sector in 2022 is energy, up more than 50%, the result of surging energy prices and dearth of ownership.  Energy also outperformed in 2021.

Will the free market be the end of the ESG mania where often financial viability is a secondary or tertiary concern?  If history is of any guise, the odds are yes as Economics 101 dictates money gravitates to the highest potential return with the least amount of potential risk.  I vividly recall the first era of socially conscience investing…aka the Calvert Funds of the early 1990s..ended following disastrous performance.

As noted above, the CPI is released at 8:30 and a major reason for surging inflation is oil as the western democracies have made oil exploration prohibitively expensive and a regulatory quagmire. [Note:  Oil is nominally higher than pre-invasion levels]  Market volatility may increase if the data is vastly different than the consensus view.

Last night the foreign markets were up.  London was up 1.14%, Paris up 2.09% and Frankfurt up 1.35%.  China was up 0.75%, Japan up 0.18% and Hang Seng up 0.97%.

Futures are up about 1% ahead of the CPI.  The 10-year is up 16/32 to yield 2.94%.


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.