In this month's Global Economic Perspective, our Fixed Income Group opines on rising energy prices, US Treasury yields, emerging-market currency pressures and global economic growth.
Six of eight indexes on our world watch list have posted gains through Monday, May 21, 2018. The top performer this year is France's CAC 40 with a gain of 6.12%. In second is Hong Kong's Hang Seng with a gain of 4.40%. In third is India's BSE SENSEX with a gain of 2.38%. Coming in last is Shanghai's SSE with a loss of 2.82%.
Data mining is a huge risk with factor-based investment strategies. Many factors have proven to not work in practice. Even the most popular factors, like value and momentum, may prove less effective going forward.
The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-March, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.
The verdict remains out as to whether recent initiatives in India, such as the note ban and the Goods and Services Tax, will constitute significant steps forward in the country’s quest to become a modern and globally competitive industrial economy.
The S&P 500 dropped to start the week and recovered slightly by Friday. The index saw a loss of 0.54% from last Friday and 0.26% loss from yesterday. The index is up 0.64% YTD and is 5.57% below its record close.
This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 148.7, down 0.6 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.80%, down from 3.87% last week. The WLI Growth indicator is now at 4.3, down from the previous week.
With the rapid development of single country ETFs, capturing factor alpha at the country level may prove to be an efficient, practical alternative to individual stock selection. In this study, we look at how effectively our internally-developed EM stock selection model can guide country overweights/underweights. Back testing shows that stock-level factor alpha can indeed be captured at the country level.
Today's report on Industrial Production for April shows a 0.7% increase month-over-month, which was better than the Investing.com consensus of 0.5%. The year-over-year change is 3.46%, down slightly from last month's YoY increase. Annual revisions were made to the entire series incorporating new benchmark data and monthly and seasonal factor revisions. The indicator is currently at an all-time high.
Last week’s Barron’s cover story asked whether U.S. value stocks are primed to break out of their “funk” after 10 years of underperformance vs. growth stocks. Many of the “growth” companies that dominate growth indexes/portfolios and look more “expensive” are actually the winners of secular changes that have occurred while value indices/portfolios are littered with casualties of the change.