The technology heavyweights continued their relentless advance, shattering any remaining illusions about the significance of security research.  It is obvious the pathway to massive over performance is buying the most widely owned and greatest capitalized companies.  So much for discovering the “undiscovered” and undervalued company, waiting for others to recognize the inherent value.

Ownership is now crowded in a few names, a trend that many believe will continue, partially the result of the massive influence of indexing.  Indexing was part of the market.  Today it is the market.

Many believe the trend will last to infinity.  However as with all investing styles, this too shall end.  For example, the largest market neutral fund—a fund that was viewed as impervious to market swings and was viewed as essentially “riskless” is down over 25% for the year.

Many are now writing the “market neutral funds” had become to crowded and declines were inevitable, the inverse as to what was being written 18 months ago.

Additionally, the popular long-short fund, a cousin to market neutral funds, have also been battered.  Bloomberg writes this asset group controls 28% of all hedge fund assets, a strategy that was also once viewed as impervious.

It is common market axiom that when everyone is doing the same thing, a massive change is at hand.

What will happen today? Yesterday gold climbed to the highest level since 2011.  Oil also advanced. Treasury yields fell even as the President is endorsing another $1 trillion stimulus package.

Last night the foreign markets were mixed.  London was down 0.08%, Paris down 0.74% and Frankfurt down 0.34%.  China was up 1.74%, Japan down 0.78% and Hang Sang up 0.59%.

The Dow should open flat amid more tensions between Washington and Beijing and worries that consumer spending will lag.  The 10-year is down 2/32 to yield 0.65%.


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.