EQUITES DOWN; TEASURIES UP

A Fed official stated yesterday an interest rate hike in June is indeed plausible.  The markets are suggesting the odds of such are about the same as that proverbial snowball down under.

Equites initially sold off by steep double digits fearing slowing global growth, perhaps the inverse of the comment made by the Fed official.  Treasuries rallied and the dollar rallied off of 15 month lows.  Value continued to outperform momentum growth, the result of domestic growth is stronger than global growth.

A nascent narrative is that many money managers/hedge funds/etc. are trend followers not setters, an argument that can be easily supported by the proliferation of ETFs and HFTs that employ similar strategies.  Some hedge fund luminaries have stated there is no forward looking thinking or geopolitical or macro-economic analysis.

I can argue the above sentiment is the result of the lack of returns outside of the largest mega capitalized momentum growth issues. If domestic growth continues to outperform international growth, I believe value will continue to rally for such is not overly dependent upon global revenues for earnings growth.  Approximately 50% of the S & P 500 revenues and 55% of its profits are generated via international trade.  The value candidates are almost entirely dependent upon domestic sales for revenue and profit growth.

Today the ADP Employment Private Employment Survey is posted.  What will this tier I statistic suggest?  Will it support the narrative US growth is exceeding all other regions/countries?  As written many times, the ADP data offers guidance for Friday’s BLS Labor report.

Analysts are expecting a 195,000 increase in private sector jobs.

Last night the foreign markets were down.  London was down 1.26%, Paris down 0.72% and Frankfurt down 0.76%.  China was down 0.05%,  Japan closed for a holiday and Hang Sang down 0.73%.

The Dow should open moderately lower on economic and profit concerns.  Oil is nominally higher. The 10-year is unchanged at 1.80%.

 

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.