A CONFLICTING ENVIRONMENT

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By: Kent Engelke | Capitol Securities

For many, things are not making sense. President Trump’s approval ratings hit a new low, but both personal and corporate confidence is surging, the result of Trump’s anti-tax and anti-regulatory attitude. It is obvious many are celebrating the possible demise of the administrative state.

According to the WSJ, for the first time in many years, the 10-year Treasury is now yielding considerably more than the S & P 500 dividend yield… 2.5% of the 10-year versus 1.9% for the S & P 500. For many, this too does not make sense, suggesting that either yields or the S & P 500 is poised to tumble.

Speaking of tumbling, the S & P 500 yesterday did not tumble, but did slip about 0.20% while the other indices were essentially unchanged. The accepted reason… trade concerns.

Continuing with the “conflicting theme,” there are divergent statements from FOMC officials regarding monetary policy. I have little concern about opposing views for typically crises occur when there is “group think” and differing opinions are not voiced fearing political and other ramifications.

What will happen today?

Last night the foreign markets were mixed. London was down 0.17%, Paris was up 0.26% and Frankfurt was up 0.01%. China was up 0.39%, Japan down 0.34% and Hang Sang was up 0.37%.

The Dow should open quietly higher. Three Fed officials speak today. Oil is up about 1% on the belief that inventories contracted for the second consecutive week. The market is now suggesting a 57% chance of an another interest rate hike by June. The 10-year is off 6/32 to yield 2.49%.

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