A General Sense of Unease is Settling Into the Markets

By: Kent Engelke | Capitol Securities

A sense of unease is in the markets. The world has changed dramatically over the past year where yesterday’s guideposts are perhaps no longer valid. The Establishment is clinging to yesterday’s status quo for power and in a desperate attempt to recover sunk costs.

Is the quote, “The more things change the more things remain the same,” appropriate?

At this juncture, the odds are favoring a world similar to the one that existed before globalism and multiculturalism became the primary mantra, a world that was prevalent for a vast period of “modern” history defined as since 1890. The globalist philosophy only commenced during the early 1990s, went on steroids in 2008 and perhaps began an incredible collapse starting last June.

Will economic nationalism, brinkmanship and patriotism continue to evolve and again become the dominant macroeconomic geopolitical drivers? The answer to this question is pivotal in determining the potential direction of the economy and markets.

I think yes.

Speaking of reversions, oil is again dictated by geopolitical issues. Crude is experiencing its longest run for gains this year as Libya’s biggest oil field suffered another outage. Even with this outage, Libya’s production is still greater than it was from 2011 through the vast majority of 2016.

The Syrian issue was an initial catalyst for the current oil advance.

For a gazillion years, any geopolitical unrest in the oil producing countries caused a spike in prices. From 2014 throughout most of 2016, any violence was largely ignored.

Commenting upon the equity markets, equities were quiet on geopolitical concerns even as oil shares advanced.

Last night, the foreign markets were mixed. London was up 0.60%, Paris was up 0.12% and Frankfurt was down 0.17%. China was up 0.60%, Japan was down 0.27% and Hang Sang was down 0.72%.

The Dow should open nervously quiet. The 10-year is up 5/32 to yield 2.35%. Oil is up again as Saudi Arabia announced that its oil production was the lowest since January, staying below the output level it pledged to maintain as part of a global deal to reduce crude supplies.


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