PROJECTED GROWTH RATES ARE CONTINUING TO RISE

It appears as though projected global growth rates are rising every day.  The IMF is now suggesting the global economy will expand by 6% this year, up from 5.5% forecasted in January.  This would be the greatest global growth in four decades of data.  The IMF also upgraded 2022 outlook to a 4.4% pace from 4.2%.

Continuing with the theme of stronger than expected growth, job creation is occurring at a pace much faster than even the most optimistic forecast had suggested.  Many employers are reporting difficulties in filling positions and are resorting to bonuses or higher wages to attract talent.

According to the JOLT survey (Labor Department’s Job Openings and Labor Turnover Survey) rose to a two-year high.  The number of people who voluntarily left their job was little changed as the quits rate held at 2.3%, only nominally lower than the record high quit rate achieved February 2019.

Economics 101 states inflation will rise in today’s environment, an expectation that is being recognized in several forward-looking indicators.  The question at hand is that these expectations are considerably lower than where inflation should be in like situations.

Against the above backdrop, several bulge bracket firms are suggesting the 10-year will spike to over 2.25% which will in turn usher in another wave of equity volatility given that some indices are priced at levels last experienced in 1929 and early 2000.

Bank America suggests the above is the biggest risk to the market, a risk that may not be offset by an acceleration of earnings in some sectors that have already front loaded five or six years of revenue growth into one year.

Markets were mixed yesterday.  The NASDAQ essentially unchanged and the Dow insignificantly lower.  Treasuries rallied about a ½ point

Last night the foreign markets were mixed.   London was up 0.78%, Paris up 0.07% and Frankfurt down 0.14%.  China was down 0.10%, Japan up 0.12% and Hang Seng down 0.91%.

The Dow should and the NASDAQ should open flat.  JP Morgan’s Jamie Dimon made some optimistic statements stating the post pandemic “boom” can last at least two years   The 10-year is off 1/32 to yield 1.67%.

 

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.