Welcome to 2020 and to a new decade.  Many want to know the future but as all know change is the only constant.  Based upon the massive ownership of several companies partially the result of passive investing and technology based trading, the vast majority believe the future will be the same as the present.   Many believe statements from today’s market icons as ironclad.

Market history however is littered with a gazillion examples as to how consensus view or predictions from today’s leaders fail to materialize.  I would like to list ten consensus views of 2015.

    1. According to Intel, computer chips will consume no energy thus reducing greenhouse emissions.  According to Intel, today’s computer chips demand more than two times more energy than a 65 inch TV.
    2. According to Ericsson, by extrapolating historical data, more than 90% of people over 6 years old would own a mobile phone by 2020.  According Bloomberg 2019 global penetration is 67% but this data is skewed by people who own and use multiple devices.  Moreover there is a global movement to prohibit phone ownership until age 13.
    3. According to Toyota, approximately 5% of cars on the road will be autonomous.
    4.  Uber will deploy flying cars.
    5.  Twenty five percent of Amazon’s deliveries will be drone.
    6.  The cloud will generate 50% of Amazon’s revenues and a vast majority of its profit.
    7. Bitcoin will be worth $1 million.
    8. Oil will never trade below $75/barrel.
    9. The budding economic nationalistic movement will quickly fade as multi polarity and interdependency becomes further ensconced.
    10. Hilary Clinton will become President.

To write the obvious, none of the above occurred.

All know today’s “definites.”  Passive and technology based trading will continue to dominate.  Geopolitical, macroeconomic and security specific research is meaningless.  Multi polarity and interdependency will again become dominant.  Technological breakthroughs will continue at its breakneck pace.  Oil will never again trade over $75 barrel.  Interest rates will forever remain low.

The markets are dictated by behavior and today’s technology dominated trading system cannot quickly adjust to the one off externality that always occurs.  Perhaps what makes today different than five years ago is the end user is the client not a money center bank or brokerage firm  Fear is more powerful than greed, a concept that is all but forgotten until the unexpected event occurs, shattering the illusion of liquidity.

It is dangerous to write what will happen in five years much less in one year.  I will argue to expect the unexpected.

Speaking of which, I think the economy will continue to grow at a pace faster than expected that will again question monetary policy assumptions.  This growth will increase the odds of increased volatility in equites and raises the probability of the President’s reelection.

All must remember voters vote their pocket books, where there is no interest like self-interest.  Most resent being told what to feel and what to think.

The recent outcome of England’s election is a perfect example of the above.  Labor and its progressive agenda was crushed, experiencing its worst defeat since 1935.  Most experts thought the outcome was to close to call.

Perhaps the only certainty to write about 2020 is change will occur.  It is the magnitude and direction of change that is unknown.

Last night the foreign markets were up.  London was up 0.90%, Paris up 1.29%  and Frankfurt up 0.87%.  China was up 1.15%, Japan closed of the holiday,  and Hang Sang up 1.25%.

The Dow should open moderately higher as China took actions to support its economy.  The 10-year is up 3/32 to yield 1.91%.


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.