FED TESTIMONY AT 10:00

FRB Chair Powell testifies to Congress about the state of the economy.  I am certain he will discuss the coronavirus and its possible implications.  Perhaps the safest comment to make is no one knows the outcome and there is not a shortage of learned opinions.  Powell’s comments can move markets but most are expecting a relatively benign testimony.

Also, today is the New Hampshire primary.  Wow!  Life is stranger than fiction.  Buttigieg, who the media has crowned as moderate even though he is campaigning to pack the Supreme Court, abolish the Second Amendment and end the electoral college, has now become a deficit hawk.

Buttigieg ultimately supports a single payer health care system, free college and expressed interest in exploring MMT.  Is there not a contradiction?

Speaking of contradiction, Buttigieg claimed victory in Iowa because he won the delegate count not the popular vote.  How can he make this claim for he supports the abolishment of the electoral college?

It is often written the markets are a microcosm of society.  Where reality is often ignored but when reality does return, it returns in dramatic action.  For example, I ask how can Greece have negative interest rates and the US has positive yields?

Speaking of negative interest rates, the amount of negative yielding debt is around $13.5 trillion, surging about $2 trillion in quick order partially the result of coronavirus scares.

Speaking of a break in reality, I have discussed at length the record amount of monies in five companies.  Is this realistic?

Speaking of returning to reality, last week I referenced a Bloomberg article about an algorithmic trading firm that did not have a negative trading day for over 10 years, a streak that ended in 2017.

Yesterday Blomberg wrote another story about the “numerous troubles of high frequency trading firms and their radical change in profitability” (i.e.  the lack of thereof).  Bloomberg wrote how this trade had become so crowded as everyone was emulating the former market leader, an environment that always ends in failure.

I rhetorically ask are the repo liquidity issues connected to the radical change in the profitability of algo trading firms?  I do not know.  Perhaps FRB Chair Powell could offer some insight today.

As noted several weeks ago Minneapolis Fed President commented the lack of liquidity in the repo market is a function of issues with hedge funds and other “alternative trading vehicles,” including the possibility of weakness in a major clearing firm or custodian.

What will happen today?

Last night the foreign markets were up.   London was up 0.82%, Paris up 0.40% and Frankfurt up 0.82%.  China was up 0.39%, Japan closed for a holiday and Hang Sang up 1.26%.

The Dow should open nominally higher ahead of Powell’s testimony.  Oil rose from a one year low.   The 10-year is off 5/32 to yield 1.59%.

kent
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.