Yesterday I referenced a Bloomberg wire story stating that during the last ten days the cross correlated trades that has been prevalent during the last 16 months is collapsing. Yesterday the trend appeared to be continuing. Is there a tectonic shift taking place in the market as momentum is now underperforming?
As widely discussed mega capitalized growth has outperformed value since 2010 with the largest capitalized momentum issues grossly outperforming everything by a 55 point margin during 2015.
Yesterday I referenced a JP Morgan study suggesting the last time value was as discounted as it is today was 1980. JP Morgan used the term “extreme premium” to describe the current relationship.
Many times I have opined the most basis tenant to make a sector to move higher is more buyers than sellers. If everyone owns something, who is left to buy when selling commences?
Is a major transition at hand? Unfortunately only history will state if one is indeed in its infancy.
Last night the foreign markets were down. London was down 0.56%, Paris down 0.97% and Frankfurt down 0.98%. China was down 2.87%, Japan down 1.42%and Hang Sang down 0.40%
The Dow should open nominally lower, partially the result of a small decline in oil. Today is options expiration day. Will volatility be accentuated or has positons already been closed out? I think the latter. The CPI is also released. Will it validate or nullify Wednesday’s PPI data which were considerably higher than the consensus estimate because of rents.
All must remember that OER or what someone thinks their house can be rented is about 30%-32% of inflationary indices. There is a diverse argument between the relationship of OER and rental rates—who leads what. A major reason why inflation is “well anchored” is because of OER which is still bumping along its bottom.
The 10-year is up 3/32 to yield 1.73%.


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.
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