Value and small stock cap stocks outperformed for the second consecutive day as the reopening appears to be gaining momentum. Several times over the past 24 months value shares have outperformed only to be beaten lower when buying recommenced in the mega sized technology shares.

As written several times the difference between value and growth is at the largest discrepancy since at least 1949 when Benjamin Graham wrote the Intelligent Investor or the treatise that Warren Buffet based Berkshire Hathaway on.

As mentioned yesterday first quarter GDP is released today. Analysts are expecting GDP to decline by 4.8%, setting the scene for a second quarter plunge of anywhere from 25% to 40%. Wow!

Speaking of plunges, the Census Department writes over 34% of society is clinically diagnosed with general anxiety disorder or depression, the direct result of the Covid-19. Perhaps more disturbing an exponential 68% of citizens under 30 are suffering from the same maladies as per the Census Department. Accordingly, anti-anxiety prescriptions have surged about 40% since March.

Calls to the National Suicide Prevention Hotline has surged 60% in the last four weeks. As noted earlier, calls in April were up 40%.

Many times, I have opined government has perhaps done to effective of a job scaring society into submission of its policies.

As discussed ad nauseum, the basis for the initial shutdown of society was the February 28 CDC report that suggested there will be over 200 million Covid-19 cases and 2.2 million deaths that would crush the health care system in quick order.

These conclusions were based on faulty or unknown data. Today the data is suggesting who could be most at risk, essentially those with pre-existing conditions, elderly, obese and have renal issues. Over 55% of the country’s 100,000 deaths have occurred in nursing homes.

While I adamantly believe there are more than the 1.5 million reported cases, conjecturally believing cases may be closer to 65 million based upon NYC data indicating about 20% of NYC residents have tested positive for antibodies, mental health issues are perhaps more of significant health issue than Covid-19. Talk about a side effect of the drug/policy in treating the disease.

Based upon first hand experience, I adamantly believe mental health issues are exponentially more difficult to cope with and treat than physical issues.

How will this potential mental health epidemic unfold?

Moderately changing topics, according to Bloomberg, an internal Facebook memos state “Our algorithms exploit the human brain’s attraction to divisiveness.” The memo further writes “If unchecked Facebook would feed users more and more divisive content in an effort to gain user attention and increase time on the platform.”

According to Bloomberg, Facebook’s interest in this divisiveness and polarization was “fleeting” with many executives blocking efforts to reform its algorithms for such does drive hits and ad revenues.

Wow! Will these allegations be regarded only as noise or will they metastasize into something of significance?

Enough of the rant, what will happen today? SpaceX rocket launch was delayed until Saturday.

Last night the foreign markets were up. London was up 0.98%, Paris up 1.13% and Frankfurt up 0.56%. China was up 0.33%, Japan up 2.32% and Hang Sang down 0.72%.

The Dow should open flat ahead of the GDP data. The 10-year is unchanged at 0.69%.


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.