A Structural Trifecta for the Capital Markets to Digest

Over the last recession, fundamentals deteriorated, and the capital markets began a squishy journey starting in 2008 and firming late first quarter of 2009. Fundamentals are the key drivers for the capital markets, but they are not the only driver. Structural changes can also have a major impact on our capital markets.  

Over the last several business days, the capital markets have been hit by a trifecta of structural changes:  

Trifecta

  1. During a publicly traded financial company conference call (we think this was no coincidence), President Obama hit the airwaves and laid out plans to dramatically change the financial industry. Details shocked many participants and immediately changed valuations of many financial companies.
  2. A question of Bernanke’s re-appointment (due by end of January), which seemed a 100% lock just weeks ago, seeped into the picture.
  3. An unexpected interim party change in a Senate seat, from a historically compliant party region (Boston, Ma.)   

Given the fundamental positives we have had at our back over the last year, it will be interesting to see how investors stomach the latest capital market movements. In our opinion, this is the first test many investors will have seen in almost a year, and is a process of shaking out the weaker hands of the market.  

Have a Great Day!  

JK

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