Initial Guidance | 5 October 2015

● US employment growth falls sharply in September | Reuters
● US factory orders slide 1.7% in August–the most in 8 mos. | USN&WR
● US dollar’s rise is weighing on US economy | NY Times
● Rising credit spreads cast a dark shadow over macro outlook | Economist
● Eurozon Composite PMI: growth slows in September | Markit
● Retail sales unchanged in Eurozone in August | RTT
● Eurozone investor confidence at 8-month low in October | RTT

In Defense Of Rolling Return Charts

Robeco’s Lukas Daalder has a bit of an issue with rolling-performance graphics. Bashing a recent chart of 1-year price returns on these pages that profiled ETF proxies for the major asset classes, he charges that “this information is useless to anyone with any sense.” Oh, dear. That sounds like trouble. Has your editor led you down a dead end? Apparently. “So if the people who compiled the graph were hoping to draw our attention to any one particular issue, they have failed,” Daalder asserts. But failure sometimes has a way of turning into success, or at least it did in this case. After advising that there was no value in a chart of rolling 1-year returns of funds representing the major asset classes, he adds that this information “still tells us something.”
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Book Bits | 3 October 2015

Superforecasting: The Art and Science of Prediction
By Philip E. Tetlock and Dan Gardner
Review via Inverse
Phil Tetlock believes we can predict the future — we, us, anyone. In his new book, Superforecasting: The Art and Science of Prediction, the Wharton management professor and psychologist makes the case that futurists are skilled, not special. Normal people can make boggling accurate predictions if they just know how to go about it right and how to practice.
Tetlock backs up his crystal ball populism with data: He’s spent the better part of the last decade testing the forecasting abilities of 20,000 ordinary Americans in The Good Judgment Project on topics ranging from melting glaciers to the stability of the Eurozone, only to find that the amateur predictions were more accurate — if not more so — than those of the pundits and so-called forecasting ‘experts’ the media so often defers to.
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Big Miss For US Private Payrolls In September

Today’s payrolls report from Washington is ugly. The crowd was expecting that today’s jobs report from the Labor Department would show that US companies added 200,000 positions in September. Instead, the release shows that private payrolls increased by a weak 118,000. The good news is that the year-over-year trend is still ahead by a healthy 2.2% through last month. Unfortunately, the annual pace continues to decelerate. Does this add up to a recession signal for the US? No, not yet, but today’s update doesn’t help boost confidence that the worst will be avoided. As I’ve been discussing for the past month or so, macro risk for the US has been rising lately, even if it still falls short of a clear and reliable signal that the business cycle has turned negative (see here and here, for instance). Today’s employment report tips the scales a bit further toward a bearish outlook for the economy.
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Consumer Discretionary Stocks Take The Lead

The recent market turbulence has knocked the health care sector from its leadership role in performance terms among the major US equity sectors. The crown has passed to consumer discretionary stocks, based on trailing one-year total return data for a set of ETF proxies. Although all corners of the US equity market have lost ground since August, the selling has reshuffled the leadership structure, leaving the Consumer Discretionary SPDR ETF (XLY) firmly at the front of the horse race.
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Initial Guidance | 2 October 2015

● US jobless claims rise, but stick close to 15-year low | Bloomberg
● US ISM Mfg Index in Sep slips to lowest level since January | WSJ
● US Mfg PMI in Sep at second-lowest level since Oct 2013 | Markit
● US construction spending in Aug rises to in over 7 years | USN&WR
● US consumer comfort index rises to highest level since mid-Jul | Bloomberg
● Global Mfg PMI growth dips to two-year low in Sep | Markit

Atlanta Fed GDPNow Model Cuts Q3 Growth Outlook For US

One forecast for a weak US economy in the final months of the year just got weaker. The outlook for third-quarter GDP growth in the US was cut in half today in the widely followed GDPNow algorithm that’s published by the Atlanta Fed. The previous estimate for a 1.8% rise was already tepid–well below Q2’s solid 3.9% advance. But the new forecast for the third quarter quarter that begins today withered even further, slipping to a thin 0.9% (seasonally adjusted annual rate).
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