Even though the Magnificent Seven made a three-month high on heels of TSLA’s 22% surge, the NASDAQ ended up 0.80% and the S & P 500 up 0.21%.
Bloomberg commented about today’s massive concentration. The Newswire remarked that the concentration is at highest levels since the 1960’s “Nifty Fifty” era—with the top seven companies accounted for about 30% of the market weight and top 25 companies at 48%.
During the 1960’s and 1970’s, these market darlings were characterized by their consistent earnings growth and high price to earnings ratios similar in respect to the “Magnificent Seven.”
What ultimately broke the trend was the inflationary environment of the 1970’s and the ensuing mid-70’s and early 80’s recessions.
As perhaps inferred, the markets are beginning to focus on the election and the incipient rise in Treasury yields.
Fixed income headlines are focused upon such nuanced terms as the lack of liquidity, primary dealer balance sheets with rising capacity constraints, a re-emergence of inflation and “mammoth” government issuance.
Fixed income markets are also being spoked by the possibility of a Trump Presidency, and the remote possibility of a “Red Sweep” that some suggests would be the worst outcome for both MBS (Mortgage Back Securities) as well as Treasuries.
As noted many times, the deficit is not a campaign issue, focusing instead upon cats and French Fries. The odds are significantly high that the deficit will be a major issue on November 6 regardless as to who is President.
What will happen today?
Last night the foreign markets were down. London was down 0.26%, Paris down 0.40% and Frankfurt down 0.14%. China was up 0.59%, Japan down 0.60% and Hang Seng up 0.49%.
Futures are nominally higher. Earnings reports have been “mixed.” Bloomberg writes “the markets are sniffing out a Republican sweep, and perhaps an electoral/Senate landslide.” The 10-year is up 3/32 to yield 4.20%.
Kent Engelke
