Retail sales figures for December showed a relatively strong trend in 4Q17, although part of that reflects a rebound from hurricane effects in 3Q17. Core CPI inflation was a bit higher than anticipated in December, but that doesn’t mean that the low inflation trend is over.
Nonfarm payrolls rose by 148,000, less than expected, in the initial estimate for December, but the increase was hardly “weak.” There is a fair amount of noise in the monthly figures, but the underlying trend is lower. Despite a tight job market, average hourly earnings were up just 2.5% year-over-year.
Interestingly, for everything else he wrote about, William Shakespeare almost never wrote about anything religious – the above passage is one of his few that that even remotely addressed anything theological or spiritual. We don’t know if this is because he was areligious or because he was too savvy to engage in any theological controversy during a fierce Catholic vs. Protestant political regime (we tend to believe the latter).
Few things in this world can be predicted with accuracy over multiyear periods and fewer still over multidecade spans. One exception is population demographics. Based on data today, we have a good idea how populations will develop through 2050.
Four times per year, at every other Federal Open Market Committee meeting, senior Fed officials submit projections for growth, unemployment, and inflation. They also put forth their expectations of the “appropriate” federal funds rate for the end of the next few years. What do the dots in the dot plot tell us about the course of policy action? Not a lot.
The appointment of Jerome “Jay” Powell as Fed chair should result in a smooth transition for monetary policy into early 2017. However, other personnel changes mean greater policy uncertainty as one looks beyond the middle of next year. This comes at a time when the risks of a policy error are increasing.
On Friday, the Commodity Futures Trading Commission (CFTC) approved bitcoin futures trading on the Chicago Mercantile Exchange (CME) and the CBOE Futures Exchange (CFE). Bitcoin has risen by a factor of ten since the start of the year.
With the Federal Reserve hiking and US rates on the rise, there’s never been a better time to reposition into global bonds as your core mandate. But when you do, it’s crucial to fully hedge against currency risk.
Goldilocks is going back for thirds. The beneficent global economic regime we’ve described for the past several months remains solidly in place – global economic growth (especially in manufacturing), strong corporate earnings and revenues, raging equity markets, low interest rates, and an almost frightening level of market complacency.
The business cycle is one of the most important drivers of investment performance. As the nearby chart shows, recessions lead to outsized moves across asset markets. It is therefore critical for investors to have a well-informed view on the business cycle so portfolio allocations can be adjusted accordingly.