Correlations Profile | Major Asset Classes | 23 January 2020

Return correlations for the major asset classes have edged down in recent years, which implies that diversification opportunities have increased, if only marginally. The correlation readings are only modestly softer overall and for several asset class pairings it’s fair to say that nothing much has changed. But reviewing all the key slices of global markets by way of pairwise return correlations shows that the median for this risk metric has slipped, based on a set of proxy ETFs.
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Macro Briefing | 23 January 2020

China locks down a second city to halt spread of coronavirus: WSJ
Coronavirus is threat that will test China’s economy: SCMP
US envoy: slain Iran general’s fate awaits successor if he kills Americans: Reuters
Trump says US growth has slowed because of Federal Reserve: CNBC
ECB expected to keep deposit rate at minus 0.5% in today’s announcement: BBG
Will digital taxes lead to the next tariff war? NY Times
Global economy in ‘sweet spot,’ says Harvard University economist: Bloomberg
Low rates, low inflation threaten central bank independence: VoxEU
Existing home sales in the US accelerated in Dec, close to 2-year high: Reuters
US economic trend still sluggish but continued to edge up in Dec: Chicago Fed

Momentum Stocks Roar Higher In 2020 Start For Equity Factors

The year is still young but so far there’s a clear winner in the horse race among US equity factors: momentum. Following a mostly meandering performance in 2019’s fourth quarter, large-cap momentum has been on a nearly non-stop rally in the new year that’s left the rest of the field in the dust, based on a set of ETFs representing factor strategies in the US equity market.

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Macro Briefing | 22 January 2020

China virus spreads, lifting death toll and raising pandemic fears: Reuters
Senate blocks effort to allow Bolton’s testimony in impeachment trial: The Hill
No date set for second phase of US-China trade talks, says China source: BBG
Trump says US GDP growth would be close to 4% if Fed cut rates sooner: CNBC
Trump’s top economic adviser Kudlow: Fed’s T-Bill buys ‘basically’ QE: MNI
Trump administration imposes more sanctions on Venezuela’s regime: CNBC
US plans to add travel restrictions to seven nations in Africa and Asia: WSJ
Amazon’s Bezos’ phone reporetedly hacked by Saudi Arabia’s crown price: TG
10-year Treasury yield slips to 1.78%, lowest since Dec. 4:

US Business Cycle Risk Report | 21 January 2020

The US economy continues to show signs of stabilizing after last year’s second-half slowdown. In addition, revised projections for the business cycle trend hint at the possibility that growth is rebounding in early 2020. Although an upbeat outlook for this year remains tentative, today’s forward review points to a mildly stronger output for the US in the first quarter.
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Macro Briefing | 21 January 2020

China confirms that new virus can spread through human contact: Reuters
China’s coronavirus outbreak prompts flight screenings in Australia: NY Times
U. of Hong Kong: virus has likely spread to 20 cities: SCMP
Trump to speak at World Economic Forum as impeachment trial begins: AP
Hundreds of US-bound migrants cross Mexico’s southern border: BBC
US Treasury Sec. warns UK and Italy re: digital-tax plans: WSJ
Moody’s downgrades Hong Kong’s long-term debt rating due to gov’t ‘inertia’: BBG
Foreign investment by firms around the world fell in 2019 to near-decade low: WSJ
IMF predicts world growth will pick up in 2020: CNBC

Macro Briefing | 20 January 2020

China reports 140 new cases of Sars-like virus: CNBC
Supply disruptions in Iraq and Libya lift oil prices: Bloomberg
White House plans to keep pressure on Iran: WSJ
Hundreds of migrants are trying to cross Mexico’s southern border: Reuters
Venezuela’s Guaidó defies travel ban, attends counter-terrorism meeting: BBC
Global survey: Capitalism doing ‘more harm than good’: Reuters
Palladium’s extraordinary surge is expected to continue: Bloomberg
New US housing construction surged in December: MW
US industrial production continued to fall in December: MW
Job openings in US fell in November to 1-1/2-year low: Reuters

Book Bits | 18 January 2020

A World Without Work: Technology, Automation, and How We Should Respond
By Daniel Susskind
Review via The New York Times
If humans’ fears that technology would replace them have been unfounded in the past, this time is different. So argues Daniel Susskind, a fellow in economics at Oxford, in his new book, “A World Without Work: Technology, Automation, and How We Should Respond.” Susskind declares that machines are getting so smart that they’ll soon replace humans at a growing list of jobs, potentially including doctors, bricklayers and insurance adjusters, thus ending what he calls the “Age of Labor.” Without some sort of intervention, he says, the inequality inherent in today’s economy will metastasize into an even greater divide between the haves and have-nots.
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Research Review | 17 January 2020 | Volatility

Macro News and Long-Run Volatility Expectations
Anders Vilhelmsson (Lund University)
December 10, 2019
I propose a new model-free method for estimating long-run changes in expected volatility using VIX futures contracts. The method is applied to measure the effect on stock market volatility of scheduled macroeconomic news announcements. I find that looking at long-run changes gives qualitatively different results compared to previous studies that only look at realized variance and the VIX. I further find that FOMC announcements on average resolve uncertainty, but only during times when policy uncertainty is higher than average. Real side macro announcements increase long-run volatility during times of low policy uncertainty, but the effect is reversed during times of high policy uncertainty.
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