Did Iran back down?  Did brinkmanship win again?  Only history will answer this question.

Perhaps the only certainty to write is the media/blogosphere is filled with official sounding but completely unsubstantiated reports.  This is dangerous for no one knows the true reality.

It is often written those who control the media can greatly influence and perhaps control opinions and society.  It is largely agreed the Third Reich’s Josef Goebbels was the greatest master ever of propaganda. 

I will argue the massive proliferation of the blogosphere is the greatest global destabilizer.  There is no attribution to any comments and the ability to validate one’s opinions has never been easier.  As stated, the issue at hand is truth could be largely lacking.

What does the above have to do with the markets?  Everything.  An early Wednesday morning Bloomberg headline read “Algos Seized on Iran Headlines Focusing on Two Words…Attack and Iran.”  The volatility was intense, markets are now back to pre-Iranian crisis levels of a week ago and I will now write the rising complacency is as intense as Tuesday night’s and the preceding week’s volatility.

It is generally accepted indexing is dominating market performance.  Most other strategies have failed including the very popular “qaunt strategies” that take advantage of pricing discrepancies between asset classes aiming to spread risk equally across all asset spectrums.  Legendary investor Warren Buffet is also struggling, lagging the indices by over 66%.

Passive investing will also fail but the question is as to when.  Unfortunately the third law of physics also applies to the markets where for every action there is an opposite and equal and opposite reaction.

Commenting briefly on yesterday’s market action, equities advanced on Trump’s statements.  Treasuries ended significantly lower in price, the result of Trump’s statements and a “very ugly ten year bond auction” where demand was more than one standard deviation below the one year average according to Bloomberg.

What will happen today?

Last night the foreign markets were up.  London was up 0.52%, Paris up 0.35%, and Frankfurt up 1.21%.  China was up 0.91%,  Japan up 1.21% and Hang Sang up 1.68%.

The Dow should open nominally higher as it appeared all have taken a step back from a deeper military conflict in the Middle East. The 10-year is unchanged at 1.88%.


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.