Yesterday was the inverse of most days.  Equities led by value rose but the megacap tech shares fell.  There is speculation Congress will agree to a fresh relief package, the amount however is under discussion.  The range is anywhere from $1.3 trillion to $3.5 trillion.  Wow!  These numbers are unfathomable!

Many times, I have commented about the historic gap between value and growth.  Year to date small cap value is down 22% and large cap growth is up 14.7%.  The gap is greater if the NASDAQ 100 is used as a proxy.

Statistically this is a fourth standard deviation trade, an event that only occurs 0.50% of the time.    In other words, there is a 99.5% chance that small cap value will outperform large cap growth.

For those who have suffered the decade long massive underperformance in value shares, someday can not occur soon enough.  Some will write the massive underperformance between value and growth commenced around 2005.

No one knows when the rotation will occur.  It could have started yesterday or maybe it will start in two years. What is certain, however, fortunes will be made and lost.

What will happen today?

Last night the foreign markets were down.  London was down 0.89%, Paris down 1.07% and Frankfurt down 0.34%.  China was up 0.37%, Japan down 0.58% and Hang Sang down 2.25%.

The Dow should open nominally lower after another diplomatic flare-up between China and America.  China’s Houston consulate was ordered to close to “protect intellectual property and private information.  And then there are earnings.  There is growing consensus the mega sized technology concerns are priced considerably higher than even the most optimistic expectations.

The 10-year is up 3/32 to yield 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.