Dan Fuss has established himself as one of the most respected bond investors in the industry over his 60-year tenure. In a talk last week, Fuss warned investors of geopolitical uncertainty and higher rates in credit markets.
The relative performance of emerging markets has been unremarkable over the past decade, however meaningful changes have taken place in the fundamental and financial construct of the asset class that are relevant for asset allocators. Most notably, the composition of the index has seen dramatic shifts in sector, country, and stock constituents...
The latest Conference Board Leading Economic Index (LEI) for September decreased to 128.6 from 128.8 in August and saw its first decline in over a year. The Coincident Economic Index (CEI) came in at 115.7, up fractionally from the previous month.
Emerging markets debt and equity have many overlapping traits, but also differ in their exposure to countries and risks. The MSCI Emerging Markets Index contains 27 countries, with the five largest accounting for 70% of market value. Three countries in Asia - China, South Korea and Taiwan - comprise more than 50% of the index.
Recent data have supported our view that the drivers of the US economy’s solid expansion remain in place, and should allow the US Federal Reserve (Fed) to move further toward its goal of normalizing interest rates. Some data releases have clearly been skewed by the recent major hurricanes, but we feel any negative impact on the economy is likely to be transient and outweighed by demand arising from reconstruction.
The modest growth rate is contributing to the length of the current economic expansion, and American households are in the best financial shape in years. Our 3Q17 Quarterly Update report discusses the economic expansion and its impact on equities, fixed income, and more.
The latest Manufacturing Index came in at 27.9, up from last month's 23.8 and has been positive for fifteen consecutive months. The 3-month moving average came in at 23.5, up from 20.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 46.4, a decrease from the previous month's 55.2. Today's 27.9 headline number came in above the 22.0 forecast at Investing.com.
Today's seasonally adjusted 222K new claims, down 22K from last week's revised 244K, was better than the Investing.com forecast of 240K. From the release: "Claims taking procedures continue to be severely disrupted in Puerto Rico and the Virgin Islands as a result of poweroutages and infrastructure damage caused by Hurricanes Irma and Maria."
We've updated this series to include Friday's release of the Consumer Price Index as the deflator and the September monthly update. The latest hypothetical real (inflation-adjusted) annual earnings are at $37,346, down 12.9% from 44 years ago.
Beyond all the twists, turns, and quirks in the economic data reports, the overall picture appears largely the same. Growth remains on a moderate track, somewhat beyond a long-term sustainable rate (as the job market continues to tighten).
Global central bankers, ministers of finance and representatives from the private sector and civic groups gathered in Washington, D.C., last week for the Annual Meetings of the IMF (International Monetary Fund) and the World Bank Group.
The European Central Bank is widely expected to announce a winding down of its quantitative easing program on October 26. Though investors are nervous, the ECB is doing a good job preparing markets for the change.
When world leaders talk, markets react. And with social media becoming mainstream, politicians have a new way of getting their message to the masses.
Low market correlations make it easier for active portfolio managers to stand out—positively or negatively. But what matters most is how a portfolio of select stocks performs through market cycles, regardless of correlations.
While the mainstream media remains obsessed with President Trump’s tweets and other controversial statements, the Commander-in-Chief is quietly packing the federal courts with conservative, originalist judges who are not only very smart but also relatively young.
For the 18th straight year, Baird Advisors held its Institutional Investors Conference in Kohler, Wisconsin. Attendees listened to legendary Washington Post journalist Bob Woodward’s perspective on the Trump White House in the context of previous administrations he has covered and to global risk expert Ian Bremmer, President and founder of Eurasia Group, who introduced the concept of a geopolitical recession and mapped a new macroeconomic landscape where the institutions that defined the post-war world order are becoming less relevant.
Today's report on Industrial Production for September shows a 0.3% increase month-over-month, which was at the Investing.com consensus. Industrial Production peaked in November 2014, only one point higher than its pre-recession peak in November 2007. The year-over-year change is 1.60 percent, up from last month's YoY increase.
The reports of the coming economic demise continue to prove premature. For much of the past few years, we have filled these pages with our data-driven retort to the constant noise about the next impending economic and market downturn.
It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium were down two cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.07 and Santa Barbara, CA is the most expensive city, averaging $3.20. Arkansas has the cheapest at $2.19. The WTIC end of day spot price closed at 51.87, a 1.8% increase from this time last week.
Next week, government statisticians will release the first estimate for third quarter real GDP growth. In spite of hurricanes, and continued negativity by conventional wisdom, we expect 2.8% growth.
The Consumer Price Index for Urban Consumers (CPI-U) released Friday puts the year-over-year inflation rate at 2.23%. It is below the 3.76% average since the end of the Second World War and above its 10-year moving average, now at 1.75%.
I first became aware of Frederick “Shad” Rowe, captain of Dallas-based Greenbrier Partners, by reading his brilliant comments in Forbes magazine decades ago. While Shade no longer writes for Forbes, his stock market insights are available via his monthly letter to the clients in his investment partnership.
Despite a hurricane-related surge in headline inflation, core inflation continued to run softer than expected in September, a trend that could make the Federal Reserve more cautious about hiking interest rates in December.
US economic activity is picking up, and as a result, we’ve raised our growth forecasts for 2017 and 2018. What’s behind the good news—and how will it impact interest rates?
Current market valuations are consistent with negative expected returns for the S&P 500 over the coming 10-12 years, with a likely market loss of more than -60% in the interim.
Long-time readers know I’m an avid Ned Davis Research fan. I’ve been a loyal client since the 1990s. Ned Davis built a fact-based, technology-driven research organization. Some years ago, Ned wrote a book titled, Being Right or Making Money and I believe that title sums up NDR’s investment research culture.
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
This Strategic Insight discusses how to bolster tax revenue by increasing potential growth and productivity through tax and spending reform to enhance global competitiveness and increase fairness across taxpayers, thus turn fiscal deficits into surplus. Various guiding principles outlined suggest various proven ways to achieve these objectives.
About 100 years ago, Argentina was one of the wealthiest countries in the world by virtue of its fertile land. Its economy thrived by shipping beef and grains around the world. But economic and political turmoil through the 1930s sowed the seeds of populism — the effects of which have lasted decades.
The Fed will enter uncharted waters as it begins to reduce its balance sheet, in addition to raising short-term interest rates. How should investors respond?
Are high-quality businesses as overvalued as the broader markets and will that bode ill for our future investment returns?
This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 30.2 was an increase of 5.8 from the previous month's 24.4. The Investing.com forecast was for a reading of 20.7.
Combining both approaches may improve your investment strategy.
Learn why cost isn’t everything.
Last Month in Perspective: The convoy of developed world central banks reducing policy accommodation appeared to gather steam. Global political developments continued to capture headlines. Interest rates moved higher on the hawkish tilt in central bank rhetoric, and equities gained on generally positive economic data.
As many of you know, copper is often seen as an indicator of economic health, historically falling when overall manufacturing and construction is in contraction mode, rising in times of expansion. That appears to be the case today. Currently trading above $3 a pound, “Doctor Copper” is up close to 24 percent year-to-date and far outperforming its five-year average from 2012 to 2016.
It is extremely difficult for an active manager to buy the best companies and/or short the worst companies and show much outperformance relative to the passive index funds. No matter how much research you do, no matter how well you know those companies, your research is not giving you an edge over the massive movement to passive investing.
The index closed with a daily gain of 0.09% and a week-over-week gain of 0.15%. The index is up 14.0% YTD.
The current situation in Puerto Rico cannot be fully understood without a bit of a history lesson.
Note: With today's release of September's Retail Sales and Consumer Price Index, we've updated this commentary to include the latest Real Retail Sales. Month-over-month nominal sales in September increased by 1.6% (1.56% to two decimals). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 1.0. The chart gives us a close look at the monthly data points in this series since the end of the last recession in mid-2009. The linear regression helps us identify variance from the trend.
U.S. stock indices have continued to push to record highs, with little apparently able to throw them off course. The grind higher has pushed through natural disasters, the Las Vegas tragedy, domestic political failures, international political tensions, and missile tests and threats from North Korea—an ample “wall of worry” for stocks to climb.
Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 145.2, up 1.2 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.62%, up from 3.17% last week. The WLI Growth indicator is now at 1.2, up from 0.7 the previous week.
The University of Michigan Preliminary Consumer Sentiment for October came in at 101.1, up 6.0 from the September Final reading of 95.1 and its highest since 2004. Investing.com had forecast 95.0.
Last quarter saw stocks globally continue to rise. The relatively accommodative monetary policy environment and improved global growth were strong drivers. However, as we head into the fourth quarter, I think it’s important that we recognize the potential for greater disruption — in terms of both geopolitics and monetary policy — which can cause greater volatility in capital markets.
The Economic Insights Channel
Dan Fuss Warns of Geopolitical Risks and Higher Rates
Dan Fuss has established himself as one of the most respected bond investors in the industry over his 60-year tenure. In a talk last week, Fuss warned investors of geopolitical uncertainty and higher rates in credit markets.
The Metamorphosis of Emerging Markets
The relative performance of emerging markets has been unremarkable over the past decade, however meaningful changes have taken place in the fundamental and financial construct of the asset class that are relevant for asset allocators. Most notably, the composition of the index has seen dramatic shifts in sector, country, and stock constituents...
Conference Board Leading Economic Index: First Decline in Over a Year
The latest Conference Board Leading Economic Index (LEI) for September decreased to 128.6 from 128.8 in August and saw its first decline in over a year. The Coincident Economic Index (CEI) came in at 115.7, up fractionally from the previous month.
5 Things to Know About Emerging Markets
Emerging markets debt and equity have many overlapping traits, but also differ in their exposure to countries and risks. The MSCI Emerging Markets Index contains 27 countries, with the five largest accounting for 70% of market value. Three countries in Asia - China, South Korea and Taiwan - comprise more than 50% of the index.
Global Economic Perspective: October
Recent data have supported our view that the drivers of the US economy’s solid expansion remain in place, and should allow the US Federal Reserve (Fed) to move further toward its goal of normalizing interest rates. Some data releases have clearly been skewed by the recent major hurricanes, but we feel any negative impact on the economy is likely to be transient and outweighed by demand arising from reconstruction.
Quarterly Update: October 2017
The modest growth rate is contributing to the length of the current economic expansion, and American households are in the best financial shape in years. Our 3Q17 Quarterly Update report discusses the economic expansion and its impact on equities, fixed income, and more.
Philly Fed Manufacturing Index: Continued Growth in October
The latest Manufacturing Index came in at 27.9, up from last month's 23.8 and has been positive for fifteen consecutive months. The 3-month moving average came in at 23.5, up from 20.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 46.4, a decrease from the previous month's 55.2. Today's 27.9 headline number came in above the 22.0 forecast at Investing.com.
Weekly Unemployment Claims: Down 22K, Lowest Since 1973
Today's seasonally adjusted 222K new claims, down 22K from last week's revised 244K, was better than the Investing.com forecast of 240K. From the release: "Claims taking procedures continue to be severely disrupted in Puerto Rico and the Virgin Islands as a result of power
outages and infrastructure damage caused by Hurricanes Irma and Maria."
Five Decades of Middle-Class Wages: September 2017 Update
We've updated this series to include Friday's release of the Consumer Price Index as the deflator and the September monthly update. The latest hypothetical real (inflation-adjusted) annual earnings are at $37,346, down 12.9% from 44 years ago.
Through the Noise: More of the Same
Beyond all the twists, turns, and quirks in the economic data reports, the overall picture appears largely the same. Growth remains on a moderate track, somewhat beyond a long-term sustainable rate (as the job market continues to tighten).
Ten Investor Takeaways From the IMF/World Bank Meetings
Global central bankers, ministers of finance and representatives from the private sector and civic groups gathered in Washington, D.C., last week for the Annual Meetings of the IMF (International Monetary Fund) and the World Bank Group.
Will ECB Tapering Trigger Market Tantrum?
The European Central Bank is widely expected to announce a winding down of its quantitative easing program on October 26. Though investors are nervous, the ECB is doing a good job preparing markets for the change.
Putting Geopolitical Tensions into Perspective
When world leaders talk, markets react. And with social media becoming mainstream, politicians have a new way of getting their message to the masses.
Falling Correlations Put Stock-Specific Attributes in Driver’s Seat
Low market correlations make it easier for active portfolio managers to stand out—positively or negatively. But what matters most is how a portfolio of select stocks performs through market cycles, regardless of correlations.
Trump Packing Federal Courts With Conservative Judges
While the mainstream media remains obsessed with President Trump’s tweets and other controversial statements, the Commander-in-Chief is quietly packing the federal courts with conservative, originalist judges who are not only very smart but also relatively young.
"Lower and Longer" Has Legs
For the 18th straight year, Baird Advisors held its Institutional Investors Conference in Kohler, Wisconsin. Attendees listened to legendary Washington Post journalist Bob Woodward’s perspective on the Trump White House in the context of previous administrations he has covered and to global risk expert Ian Bremmer, President and founder of Eurasia Group, who introduced the concept of a geopolitical recession and mapped a new macroeconomic landscape where the institutions that defined the post-war world order are becoming less relevant.
The Big Four Economic Indicators: Industrial Production Up 0.3% in September
Today's report on Industrial Production for September shows a 0.3% increase month-over-month, which was at the Investing.com consensus. Industrial Production peaked in November 2014, only one point higher than its pre-recession peak in November 2007. The year-over-year change is 1.60 percent, up from last month's YoY increase.
Third Quarter 2017: I’m All Right … Don’t Nobody Worry About Me
The reports of the coming economic demise continue to prove premature. For much of the past few years, we have filled these pages with our data-driven retort to the constant noise about the next impending economic and market downturn.
Weekly Gasoline Price Update: Regular and Premium Down Two Cents
It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium were down two cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.07 and Santa Barbara, CA is the most expensive city, averaging $3.20. Arkansas has the cheapest at $2.19. The WTIC end of day spot price closed at 51.87, a 1.8% increase from this time last week.
GDP Growth Looking Good
Next week, government statisticians will release the first estimate for third quarter real GDP growth. In spite of hurricanes, and continued negativity by conventional wisdom, we expect 2.8% growth.
A Long-Term Look at Inflation
The Consumer Price Index for Urban Consumers (CPI-U) released Friday puts the year-over-year inflation rate at 2.23%. It is below the 3.76% average since the end of the Second World War and above its 10-year moving average, now at 1.75%.
Better, Faster, Cheaper
I first became aware of Frederick “Shad” Rowe, captain of Dallas-based Greenbrier Partners, by reading his brilliant comments in Forbes magazine decades ago. While Shade no longer writes for Forbes, his stock market insights are available via his monthly letter to the clients in his investment partnership.
Another Weak Inflation Report Won’t Help the Fed’s Dilemma
Despite a hurricane-related surge in headline inflation, core inflation continued to run softer than expected in September, a trend that could make the Federal Reserve more cautious about hiking interest rates in December.
The US Economy Is Stronger—What Does It Mean for Interest Rates?
US economic activity is picking up, and as a result, we’ve raised our growth forecasts for 2017 and 2018. What’s behind the good news—and how will it impact interest rates?
Why Market Valuations are Not Justified by Low Interest Rates
Current market valuations are consistent with negative expected returns for the S&P 500 over the coming 10-12 years, with a likely market loss of more than -60% in the interim.
On My Radar: Risk Management for All Markets
Long-time readers know I’m an avid Ned Davis Research fan. I’ve been a loyal client since the 1990s. Ned Davis built a fact-based, technology-driven research organization. Some years ago, Ned wrote a book titled, Being Right or Making Money and I believe that title sums up NDR’s investment research culture.
Inflation: An X-Ray View of the Components
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
What To Expect With Tax Reform
This Strategic Insight discusses how to bolster tax revenue by increasing potential growth and productivity through tax and spending reform to enhance global competitiveness and increase fairness across taxpayers, thus turn fiscal deficits into surplus. Various guiding principles outlined suggest various proven ways to achieve these objectives.
Argentina: Will the Reforms in Place Pay Off?
About 100 years ago, Argentina was one of the wealthiest countries in the world by virtue of its fertile land. Its economy thrived by shipping beef and grains around the world. But economic and political turmoil through the 1930s sowed the seeds of populism — the effects of which have lasted decades.
The S&P 500 versus Cash Decision
The Fed will enter uncharted waters as it begins to reduce its balance sheet, in addition to raising short-term interest rates. How should investors respond?
Equity Market Valuations: We Haven’t Been Here Before
Are high-quality businesses as overvalued as the broader markets and will that bode ill for our future investment returns?
Empire State Manufacturing Survey: Activity Grew in October
This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 30.2 was an increase of 5.8 from the previous month's 24.4. The Investing.com forecast was for a reading of 20.7.
Why “either/or” is the wrong approach to active vs. passive
Combining both approaches may improve your investment strategy.
5 considerations for choosing an investment beyond just cost
Learn why cost isn’t everything.
Drying Paint or Boiling Frog?
Last Month in Perspective: The convoy of developed world central banks reducing policy accommodation appeared to gather steam. Global political developments continued to capture headlines. Interest rates moved higher on the hawkish tilt in central bank rhetoric, and equities gained on generally positive economic data.
Car Manufacturers Are Electrifying Copper, “The Metal of the Future”
As many of you know, copper is often seen as an indicator of economic health, historically falling when overall manufacturing and construction is in contraction mode, rising in times of expansion. That appears to be the case today. Currently trading above $3 a pound, “Doctor Copper” is up close to 24 percent year-to-date and far outperforming its five-year average from 2012 to 2016.
The World Turned Upside Down
It is extremely difficult for an active manager to buy the best companies and/or short the worst companies and show much outperformance relative to the passive index funds. No matter how much research you do, no matter how well you know those companies, your research is not giving you an edge over the massive movement to passive investing.
S&P 500 Snapshot: Up 14% YTD
The index closed with a daily gain of 0.09% and a week-over-week gain of 0.15%. The index is up 14.0% YTD.
Puerto Rico: Left On An Island
The current situation in Puerto Rico cannot be fully understood without a bit of a history lesson.
The Big Four Economic Indicators: September Real Retail Sales
Note: With today's release of September's Retail Sales and Consumer Price Index, we've updated this commentary to include the latest Real Retail Sales. Month-over-month nominal sales in September increased by 1.6% (1.56% to two decimals). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 1.0. The chart gives us a close look at the monthly data points in this series since the end of the last recession in mid-2009. The linear regression helps us identify variance from the trend.
Schwab Market Perspective: Preparing for the Latter Innings
U.S. stock indices have continued to push to record highs, with little apparently able to throw them off course. The grind higher has pushed through natural disasters, the Las Vegas tragedy, domestic political failures, international political tensions, and missile tests and threats from North Korea—an ample “wall of worry” for stocks to climb.
What Inflation Means to You: Inside the Consumer Price Index
Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
ECRI Weekly Leading Index: "Consensus Plays Catch Up to Our Global Growth Call"
Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 145.2, up 1.2 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.62%, up from 3.17% last week. The WLI Growth indicator is now at 1.2, up from 0.7 the previous week.
Michigan Consumer Sentiment: October Preliminary Surges, Highest Since '04
The University of Michigan Preliminary Consumer Sentiment for October came in at 101.1, up 6.0 from the September Final reading of 95.1 and its highest since 2004. Investing.com had forecast 95.0.
Q4 Market Outlook: Six Trends to Watch
Last quarter saw stocks globally continue to rise. The relatively accommodative monetary policy environment and improved global growth were strong drivers. However, as we head into the fourth quarter, I think it’s important that we recognize the potential for greater disruption — in terms of both geopolitics and monetary policy — which can cause greater volatility in capital markets.