IS A TECTONIC ROTATION IN ITS INFANCY?

Equites fell amid hawkish comments from Federal Reserve officials.  High dividend shares and companies sensitive to a higher dollar declined the most while banks gained.  Utilities are now down for eight consecutive sessions.  Consumer staples and phone companies also got hit.

As noted many times the above sectors are grossly over owned.  Several weeks ago I commented that according to Bloomberg if utilities traded at their aggregate average yield this sector would decline about 45%.  Consumer staples would decline about 42% if this group reverted to its average dividend yield.

Wow!  Most have yet to acknowledge the interest rate risk inherent in these shares.

Speaking of interest rates, the bond market fell again yesterday with yields approaching pivotal technical points.  The ECB stated yesterday that it would gradually wind down bond purchases before the conclusion of its $1.9 trillion QE program.

The next several days the economic calendar is busy culminating with Friday’s release of the BLS employment survey.  How will the data influence the perceptions of monetary policy and the direction of some of the most over owned sectors?

Last night the foreign markets were mixed.  London was down 0.53%, Paris down 0.56%, and Frankfurt down 0.59%.  China was up 0.21%, Japan up 0.50%, and Hang Sang up 0.42%.

The Dow should open flat ahead of a data deluge.  Oil is up again because of another unexpected decline in inventories, its fifth consecutive unexpected decline.   The 10-year is flat at 1.68%.

 

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.