Macro Briefing: 14 December 2017

GOP’s legislative agenda threatened after Alabama loss: Politico
Fed raises target rate 50 basis points to 1.25%-1.50% range: CBS MoneyWatch
Fed chair Yellen is cautious on growth prospects for GOP tax cut: Bloomberg
US core consumer inflation dips to 1.7% y-o-y pace, close to 2yr low: Reuters
Retail spending growth in China accelerates: MNI
China’s central bank unexpectedly lifts short-term rates: RTT
UK’s Parliament votes to have final say over Brexit: Guardian
Fed’s median GDP growth forecast for 2018 raised 40bp to 2.5%: Federal Reserve

Building A “Market” Portfolio With Statistical Factor Weights

Building a “market portfolio” has obvious benefits for portfolio design. The asset allocation is relatively objective in the sense that Mr. Market chooses the weights. History suggests this is a competitive strategy. Even if it’s not slavishly followed, market weights can be useful for guidance in portfolio design and management. But the necessary task of estimating market values can be problematic, especially if the portfolio includes so-called alternative asset classes and strategies. A possible solution: using a statistical factor model to estimate a market portfolio.
Continue reading

Macro Briefing: 13 December 2017

An upset victory for Dems in Alabama’s Senate race: The Hill
Federal Reserve on track to hike interest rates today: Reuters
Vote on final GOP tax bill expected next week: LA Times
US Sec. of State offers direct talks with N. Korea with no conditions: Reuters
UK loses jobs at fastest pace in two years: Bloomberg
Italy’s industrial output picking up speed: Bloomberg
Pension liability burdens for US states trending up: Fitch Ratings
US producer prices pop in Nov, suggesting inflation will rise: Reuters
If Trump fires Mueller, a constitutional crisis may follow: American Prospect
Nearly half of small US businesses in Nov expect stronger economy:  Haver

2018 Comes Into Focus

The year is winding down, which means that we’re knee-deep in newly minted 2018 investment outlooks. All the usual caveats apply, of course, but there’s a generous helping of perspective too. As an example, here’s a select sampling from recent publications that caught our eye:
Continue reading

Macro Briefing: 11 December 2017

US-Japan-S. Korea military drills aim to counter N. Korea Threat: NY Times
Southern California wildfires continue to wreak havoc: CNN
China’s inflation rate ticks lower in November: MNI
Bitcoin futures debut with a sharp increase: Reuters
Economists expect widespread rates hikes by central banks in 2018: Bloomberg
Payrolls in US rise 228,000 in November, beating expectations: Bloomberg
US wage growth still well below pre-2008-crisis rate: Paul Krugman
Investor optimism is unusually high: Heisenberg Report

Book Bits | 9 December 2017

Blood Profits: How American Consumers Unwittingly Fund Terrorists
By Vanessa Neumann
Review via Kirkus Reviews
An alarming, and often alarmist, survey of how spending by consumers might support terrorist organizations and organized crime enterprises, especially drug cartels.
Neumann, the president of Asymmetrica, a consultant group that advises governments and corporations about combating illicit trade, refers to Venezuela, where she was born, to demonstrate how a leftist government takeover can become just as easily mired in corruption as a rightist one. Throughout the book, the author relies on examples from her personal life, her work as a consultant, research studies (from the United Nations and other sources), and her deeply felt ideology. She warns that terrorist groups and drug cartels have learned to join forces to assist each other in their lethal activities, and such an unholy partnership sometimes depends on the corruption of government officials.
Continue reading