Today is Monday October 19 a date I vividly recall.  Thirty-three years ago, and after only six months in the business, the Dow plummeted 22%, the largest one-day percentage drop in history.  I am a collector of periodicals and in my desk, I have a copy of the October 16, 1987 Donaldson Lufkin and Jenrette Portfolios Manager’s Weekly research book that indicated equities are a buy.

Reading these dated periodicals is fascinating for they give great insight to underlying psychology, further validating my view that it is never different there are just different people.

Commenting about Friday’s economic data, despite the absence of fiscal stimulus, retail sales crushed expectations across every aggregate by over 1%.  Many had stated sales would plummet with the expiration of enhanced unemployment benefits.  Retail sales are now greater today than they were in February.

Some have suggested the surge in sales is the result of a drawdown in savings.  While the savings rate is down from unsustainable levels, credit card debt is also declining.

Consumer confidence also rose in September to the highest level in 7 months, a rise many might find incomprehensible given the wretched political environment, civil unrest and rising COVID cases.  A major reason for the increase in confidence is the ability to get a job and rising home values.  I must write confidence levels are still below pre-pandemic levels.

Most people gauge their financial health [and confidence] by the ability to get a job and home values.  The correlation back to rising home values and retail sales is strong.  Home values are surging in the secondary and tertiary cities.

Will this data impact the outcome of the election?

An NBC/Wall Street Journal poll released last week, a majority of voters say they are better off today than they were four years ago—but the country overall is worse off.  This poll also indicated Biden had a 11% lead over Trump, a statistic that is in complete contradiction to history given the vast majority of voters vote their pocketbook.

Can I suggest a possible reason for the disconnect?  A mid-September Gallup poll indicated that a 65% of people who respond to polls are not entirely truthful, perhaps fearing recrimination.  Wow!

We are living in unique times where life is indeed stranger than fiction.

Just as aside, to suggest that COVID is not political is absurd.  According to Gallup, 64% of Republican men and 54% Republican women are “ready to return to normal activities right now.”  Only 5% of Democratic men and 3% of Democratic women felt the same.

Radically changing topics, equities were again mixed with increased commentary about the massive discrepancy between value and growth.

The economic calendar is comprised of several housing statistics, the release of the Federal Reserve Beige Book and several manufacturing indices.  Earnings season also accelerates.  What will have the biggest impact on trading….the election, stimulus, earnings, data?  I would argue that impact of each variable can radically change on a moment’s notice.

Last night the foreign markets were mixed.  London was down 0.21%, Paris up 0.32% and Frankfurt down 0.04%.  China was down 0.71% Japan up 1.11% and Hang Sang up 0.64%.

The Dow should open nominally higher on stimulus optimism. The 10-year is off 8/32 to yield0.78%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. 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. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.