Nervousness amongst many iconic market luminaries is rising with one calling the current environment the “Wild West.”   In my view a major reason for this nervousness is the massive influence of the absolute dollar amount of assets in passive or momentum driven vehicles.

According to JP Morgan 80% of all equity assets are now in products devoid of any macro economic, geopolitical or individual security analysis creating a lemming like environment where knowledge and experience is meaningless and worthless.

The Bank writes “60% of all equity assets are now in passive/ETF products and 20% in trend following quantitative vehicles.”  The Bank further writes such an environment could be perhaps systemic given that there is “no other side of the trade,” an environment that is greatly exacerbated by the lack of liquidity, a topic that has been discussed at length.

JP Morgan further writes this is the first time an investing strategy has evolved to into the only investing strategy.   In the Bank’s view because of today’s environment, there are sectors that are greatly over valued and other sectors that are greatly undervalued which could have an unprecedented market “melt up.”

Wow!  In my view this is further confirmation between the record difference between value and growth.

Change is the only constant but the pivotal question at hand is when will this change occur?

What will happen today?  Activity may begin to wane by midafternoon ahead of the 4th of July weekend.

Last night the foreign markets were up.  London was up 0.56%, Paris up 0.04% and Frankfurt down 0.06%.  China was down 0.96%, Japan up 0.11% and Hang Sang up 1.17%.

The Dow should open mixed as enthusiasm over trade deal waned.  The 10-year is up 2/32 to yield 2.02%.

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.