Equities were mixed as all weighed the likelihood for a new spending bill, potential coronavirus vaccines and an escalation of trade tensions with China that could spill over into trade.  The dollar weakened and gold and silver advanced to the highest level in over nine years.  Oil was essentially unchanged.

As discussed several times, it is not whether there will be another stimulus but rather how much?  Will it be $1.3 trillion?  $3.5 trillion?  In my view these amounts are unfathomable.  The year to date budget deficit is $2.7 trillion, shattering the previous record by a large amount. The current deficit is $26.5 trillion and there is a possibility it could reach $30 trillion by year’s end., up from the $22.5 trillion at the start of the year.

Wow!  Writing cynically, we are already experimenting with Modern Monetary Theory (MMT), or the idea that a government can spend and borrow exponentially if it is done in their own currency and suffer from no ill effects.

I and so does the vast majority of market professionals believe MMT is at a best a misguided idea that will forever alter and perhaps destroy economies that endorse such a concept.  There are ample examples to support such a supposition.

There are only two manners in which to overcome massive debt…restructure or inflate.

I can argue inflationary pressures will be considerably higher in the proceeding months, adding yet another plank to the income inequality discussion.  The nine year high in gold and silver and weakening dollar supports such a view.

Last night the foreign markets were mixed.  London was up 0.58%, Paris up 0.49% and Frankfurt up 0.58%.  China was down 0.24%, Japan down 0.58% and Hang Sang up 0.82%.

The Dow should open nominally higher for a myriad of possible reasons including another stimulus, vaccine hopes and the belief the expansion will continue.  Gold is again advancing.     The 10-year is unchanged at 0.59%.


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.