Are the markets coming to realization of the President’s agenda?  Recent comments and headlines on Bloomberg read:

    • “The President has proposed $6 trillion in spending in 100 days.  How will this be paid?”


    • “The Federal Budget is already $4 trillion.  The Budget has more than doubled.”


    • “Increased taxes and IRS audits will not cover bill.  Monetization of the debt is all but inevitable.”


    • “The President was not given a mandate.  Will he spell doom for the Democratic Party?”


    • “The President campaigned as a moderate.  He is proposing a complete rewrite of the economy, taxes and society.”


    • “Can the markets absorb the Treasury issuances required to fund the President’s plans.”


    • “Federal revenue projections may not meet expected levels with greater taxation.”


    • “The President is proposing an agenda that closely mirrors European socialism.”


    • “The President’s support is not as great as believed.  There were only two presidents that had a lower approval ratings 100 days into the Presidency…Trump and Ford.”


I must again note the above headlines/comments are from an approximate 3-hour period from Bloomberg, a news source which was an unambiguous supporter of the President and the Democratic agenda.

Consensus believes the odds of passing the President’s agenda are low.  However, I think a major reason why the markets reversed direction several times yesterday was the realization that the President is not just offering political platitudes and part of his agenda will become law.

The GDP data clearly indicates rising inflationary pressures.  The President’s spending plans will only exacerbate an already tenuous position.  With interest rates and valuations at current levels, there is no room for error.  What the Federal Reserve is suggesting and the policies that it is espousing have never been accomplished successfully.

I reiterate my long-held view growth will exceed expectations as monetary velocity is accelerating, M-2 is surging at a 27% pace, and over $3 trillion of excess reserves earning no interest.  Nominal GDP—growth before inflation—has the potential to exceed 11%, the greatest growth in a generation. 

There is a strong probability that Main Street may outperform Wall Street for the first time in almost 20 years on this massive reallocation of funds.

Commenting about earnings, Bloomberg writes “The FAANGS” have crushed earnings and sales estimates by the greatest margin on record.”   As a cohort, the logical question to ask is why is this most widely held group of companies underperforming for the first time in many years? 

As noted many times, approximate 6 years of revenue and profit growth were front loaded into 14 months.  The growth rate is slowing, an anathema for companies priced to grow at unsustainable rates until infinity amplified by potentially higher interest rates.

A basic premise for any company/sector to trade higher is to have more buyers than sellers.  This group of six stocks is the most widely owned group in history.  The amount of buying power to move shares higher is gargantuan.

What will happen today?

Last night the foreign markets were down.   London was down 0.12%, Paris down 0.35% and Frankfurt up 0.04%.  China was down 0.81%, Japan down 0.83% and Hang Seng down 1.97%.

The Dow should open moderately lower.  China’s antitrust crackdown weighed on Asian technology shares, perhaps a reason for NASDAQ’s futures being lower by almost 1% even as AMZN exceeded expectation.  Speaking of profits, Bloomberg reports of the 290 S & P 500 companies that have reported results, 88% have met or beaten estimates.

The 10-year is off 3/32 to yield 1.65%.


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.