Will the December 4 Italian referendum be the final geopolitical risk event of 2016?  To remind all the referendum is about a stream lining of the Italian government fearing a possible “Italiexit” if the populists win as was the case in England and the US.

As noted many times interdependency and multipolarity have been replaced with nationalism and patriotism, two attitudes that have been around since the dawn of mankind versus the 25 year tenure of interdependency utilizing the fall of the Berlin Wall as the benchmark.

I am certain attention will soon focus upon the upcoming vote with an infinite number of potential interpretations.

Speaking of interpretations, the global bond market has definitively stated a Trump presidency will cause demand pull inflation as the losses in sovereign debt is now over $1.5 trillion.  The 10-year Treasury has increased in yield by 41 basis points, the steepest climb in more than seven years and an index of relative strength is at the most oversold level since 1990.  The thirty year Treasury had its biggest rout in over a decade.

Few expected such a rout but I do think it is significant that the 10 and 30 year Treasury is now yielding around January 1 levels.

Speaking of a potential unexpected event, will OPEC curtail production?  Oil was up over 5.7% yesterday on the possibility.

I ask how the bond market will respond if OPEC strikes an agreement.  It widely known if oil remains around current prices Saudi Arabia may be bankrupt in four years thus suggesting economic conditions are dire for the cartel.  November 30 could be of considerable significance.

Commenting about yesterday’s market activity, the NASDAQ advanced 1.1% on the “must own growth stock” while the Dow was up about 0.25% on the strength of the financials and the energy.

Last night the foreign markets were down.  London was down 0.76%, Paris down 0.88% and Frankfurt down 0.76%.  China was up 0.02%, Japan up 1.10% and Hang Sang down 0.19%.

The Dow should open moderately lower.  Since Trump was elected, financials outperformed utilities by 17%, the biggest gap since April 2009. Financial were up 10% while utilities—the “must own and can’t lose money” sector—down 7%.  What is this suggesting?  And then there is the mega capitalized technologies.

The 10 year is off 14/32 to yield 2.72%.

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.