IS LIQUIDITY THE GREATEST CONCERN OF THE FED?S TODAY ONE OF THE STARKEST EXAMPLES OF TOMORROW’S VIEW OF REALITY?

Equities were encouraged by headlines suggesting the US and China are “coming down to the final stages” of a trade deal.  Trade sensitive tech shares again led the advance.  Treasuries traded nominally lower.  Oil ended about 2% higher.

Data released Friday was mixed with the manufacturing data skewed by the GM strike.  Retail sales largely met expectations.  Generally speaking the statistics indicated the consumer is still willing to spend albeit at a slower pace than earlier in the year.

Washington is still viewed as nothing other than a freak show.  Most have acknowledged the vast majority of leading Democratic presidential candidates would wreak havoc on the economy and the market.

Some have opined the Democratic Party has set itself up for massive failure as most believe the country is not as far left as the candidates are suggesting.  Several high profile business leaders are stating many reliable Democratic donors/backers will be uninvolved given the progressive and antibusiness stance of these leading candidates.

Speaking of politics, for the first time ever all fifty states are investigating a company…Google.  Wow!  Each state’s motives are different but the simple fact of the matter is Google is in the cross hairs of everyone.  The possible ramifications are infinite.

Radically changing topics, the Fed warned yesterday of “deterioration in US Treasury and equity futures markets.”  The Fed further stated “liquidity in equity futures has become very fragile over time, disappearing when it is needed the most.”

I will argue this is the result of Dodd Frank and the massive proliferation of index and passive investing where the end user and provider of liquidity is the customer not a money center bank or brokerage firm.  Fear is more powerful than greed.

In my view, the Fed validated the concerns of more seasoned market participants.  Hopefully change will occur before a crisis unfolds.

What will happen this week?

The economic calendar is comprised of various housing statistics, manufacturing surveys and the Minutes from the latest FOMC meeting.

Last night the foreign markets were mixed.  London was up 0.31%, Paris down 0.14%, and Frankfurt down 0.07%.  China was up 0.62%, Japan up 0.49%  and Hang Sang up 1.35%.

The Dow should open flat The 10-year is off 6/32 to yield 1.86%.

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.