Macro Briefing: 25 September 2018

Supreme Court nominee denies sexual misconduct charges on TV: Fox
Questions swirl about future of Deputy Attorney General Rosenstein: CNN
Trump’s lawyer calls for ‘a time out’ in Mueller probe if Rosenstein leaves: ABC
Russia plans to install advanced missiles in Syria: Axios
European Union rolls out plan to sidestep US sanctions on Iran: BBC
JP Morgan strategist: Trump risks ‘major miscalculation’ over US-China trade: MW
Dallas Fed Mfg Index: slower but still healthy growth in Sep: Dallas Fed
Chicago Fed Nat’l Activity Index (3mo avg) jumps to 4-mo high in Aug: Chicago Fed

Macro Briefing: 24 September 2018

Kavanaugh confirmation suffers a new setback after 2nd assualt claim: Politico
US and China impose new round of trade tariffs today: CNBC
UK’s May under growing pressure to abandon Chequers Brexit plan: Guardian
Iran warns US and Israel of revenge after attack on military parade: Reuters
OPEC and allies struggle to replace Iran’s falling oil supply: Reuters
Brent oil at 4-year high after OPEC punts on raising output: Bloomberg
Does US-China trade war put US tech and telecom leadership at risk? NY Times
US Composite Output Index: growth slips to 17-mo low is September: IHS Markit

Book Bits | 22 September 2018

Fighting Financial Crises: Learning from the Past
By Gary B. Gorton and Ellis W. Tallman
Summary via publisher (University of Chicago Press)
If you’ve got some money in the bank, chances are you’ve never seriously worried about not being able to withdraw it. But there was a time in the United States, an era that ended just over a hundred years ago, in which bank customers had to pay close attention to whether the banking system would remain solvent, knowing they might have to rush to retrieve their savings before the bank collapsed. During the National Banking Era (1863–1913), before the establishment of the Federal Reserve, widespread banking panics were indeed rather common. Yet these pre-Fed banking panics, as Gary B. Gorton and Ellis W. Tallman show, bear striking similarities to our recent financial crisis. In both cases, something happened to make depositors—whether individual customers or corporate investors—“act differently” and find reason to question the value of their bank debt.
Continue reading

Research Review | 21 September 2018 | Volatility

Hedging With Volatility
Mario Alagoa (Sacred Heart University)
May 9, 2018
A risk-averse investor with a long equity position is presumably interested in identifying a hedging strategy that protects the value of that investment. The common approach encompasses using either financial derivatives or holding assets (such as gold or Swiss francs) as portfolio hedges as they show negative correlation with equities. This paper proposes using volatility indexes as portfolio hedges instead; it shows that a volatility-based dynamic hedging strategy is the most effective at protecting the value of an equity investment.
Continue reading

Macro Briefing: 21 September 2018

US imposes sanctions on China for buying Russian military equipment: Reuters
European Council president: UK’s Brexit plan “will not work”: BBC
Fed Chairman Powell talks to Congress re: the central bank’s independence: CNBC
Existing home sales in US unchanged in August: Reuters
Leading indicators for US signaling continued economic expansion: CB
US stock market indexes — Dow & S&P 500 — close at record highs: LA Times
US jobless claims slip to 49-year low, partly due to Hurricane Florence: MW
Philly Fed Mfg Index rebounds in September following sharp fall in August: MW
US 10yr/German 10-year yield spread at record high: 2.60 percentage points:

Macro Briefing: 20 September 2018

US prepared to resume denuclearization talks with North Korea: Reuters
Polls continue to give Dems edge for taking back House in Nov: RCP
China set to cut average trade tariffs for most of its partners: Bloomberg
Will China retaliate in trade war by selling its massive Treasury holdings? NY Post
The paradoxical US economy: low wages and low unemployment: The Atlantic
JP Morgan’s Dimon: cyber warfare is biggest risk to the financial system: CNBC
2-year Treasury yield returns to 2008 highs: CNBC
US housing starts: 1yr change rebounded in Aug as trend for building permits fell:

A Tale Of Two Consumer Sector Returns: Discretionary vs. Staples

Ahead of revisions to the US equity sector landscape in a few days, the existing definitions show that consumer discretionary, technology, and health care shares continue to lead this year, based on a set of exchange-traded funds. The upcoming reshuffling may reorder the horse race, but for now these three sectors are the dominant year-to-date performers through yesterday’s close (Sep. 18). Meanwhile, shares that comprise the so-called consumer staples sector are in the red year to date, posting the second-worst performance for the major sectors.
Continue reading