Yesterday I referenced one measure utilized by JP Morgan that value’s performance in June was the worst monthly performance as compared to growth since August 2000.  Yesterday value came surging back with every S & P 500 group up for the exception of technology (aka growth), an event that has only happened twice in the proceeding 12 months according to Bloomberg.

The reason for the massive rotation—a strong batch of economic reports.  The Manufacturing sector is expanding robustly albeit the ISM did miss expectations, primarily the result of bottlenecks.  The prices paid component however hit a 42-year high, partially the result of these bottlenecks and great demand.

Weekly jobless claims fell to a fresh pandemic low as claims were lower than anticipated.

Speaking of jobs, June’s employment data is released at 8:30.  Non-farm and private sector payrolls are expected to increase by 720,000 and 615,000, respectively.  A 5.6% unemployment rate, a 3.6% increase average a hourly earnings, a 34.9 average work week and a 61.7% labor participation rate (LPR).

As widely known, the Federal Reserve has adamantly stated inflation is transitory, partially from the upcoming expiry of enhanced unemployment benefits that has temporarily reduced the supply of labor as over 53% of workers receiving these benefits are making more money not to work rather than to work.

The Committee believes when these worker’s re enter the workforce in September, labor prices (and inflation) will subside.

As noted yesterday, twenty-six states have already discontinued these extended benefits.  How will such be reflected in the data?  Will it validate or nullify the Fed’s views?

Changing topics, several lawmakers are “slamming” BlackRock and StateStreet against the rise of ESG trading in retirement portfolios and the roles these gargantuan money managers exert in exercising shareholder rights on behalf of millions of American investors.

The legislators are accusing both leviathans of placing their needs, desires, and economic interests ahead of their clients, a view easily supported by letters to the companies that they own (which is about 15% of every member of the S & P 500), public statements made by their respective corporate chieftains, and the firm’s investing banking activities.

As noted several weeks ago, the Biden Administration issued an executive order that lowered the fiduciary standard for ESG investing, a point challenged by both Senator Toomey and Senator Johnson stating that financial security of millions of Americans is being threatened given the vast majority of projects at this juncture lack financial viability.

Wow!  How will this unfold?   Will yesterday’s comments about the Robinhood settlement become prophetic?

Speaking of Robinhood, Robinhood reported yesterday that 17% of its transaction-based revenue in the first quarter came from cryptocurrencies, up from just 3% in the same period of 2020.  Thirty four percent of that came from the trading of Dogecoin, a crypto that originated as a joke and has no perceived value.

What is this suggesting?

Last night the foreign markets were mixed.  London was up 0.17%, Paris up 0.03% and Frankfurt up 0.37%.  China was down 1.95%, Japan up 0.27% and Hang Seng down 1.80%.

The Dow should open flat but this could change radically if the 8:30 data sharply differs from expectations. The 10-year is up 5/32 to yield 1.45%.  Oil is steady at $75/barrel, the highest level since 2018.


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.