Most thought equities would be crushed with a Trump rally.  Treasuries however were decimated, plunging the most in five years.  A gauge of inflation expectation climbed to the highest since July 2015 amid speculation a Trump administration and a Republican Congress will boost growth.

The basis for this view is the possible repeal of Dodd Frank, the restrictive financial reform bill that in my view has crushed growth.  Capitol is the lifeblood of capitalism and if capital is restrained in any manner, including regulatory over reach, growth will suffer.

As noted a gazillion times, excess bank reserves are over $2 trillion versus the historical norm of $1 billion (no typo).  Moreover because of Dodd Frank capital formation via the traditional means has been sharply curtailed.

Many times I have referenced the lack of monetary velocity or the turnover of money, commenting according to the Chicago Fed if velocity accelerated to 50% of its norm growth could potentially reach 6% and inflation over 10%.


Yesterday the most known mega capitalized growth issue sold off while the financials advanced considerably.

I think the combination of the repeal of Dodd Frank and Obamacare, accompanied by regulatory reform has the potential for a 4%-5% growth rate with the smaller capitalized and value companies greatly outperforming the mega cap issues.

If yesterday was a harbinger of things to come, the above outlook is indeed highly plausible.

One other thought.  Yesterday ETF assets exceeded that of hedge funds.  As widely known, ETFs are low cost passive investment strategies focused primarily on size not analysis.  Hedge funds are high cost active managers utilizing economic thought.

Are the days of ETFs now numbered?

What will happen today?

Last night the foreign markets were up.  London was up 0.02%, Paris up 0.72%, and Frankfurt up 0.51%.  China up 1.12%, was Japan up 6.72% and Hang Sang up 1.89%.

The Dow should open moderately higher on speculation that Trump’s policies will benefit business.   The 10-year is off 18/32 to yield 2.12%.

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.