US Small Cap Stocks Continue To Outperform Big Caps This Year

The rally in shares of small-capitalization shares relative to large caps has accelerated in recent weeks. A month ago, the Russell 2000 (a widely followed gauge of small companies) was ahead of its large-cap counterpart (Russell 1000) by roughly three percentage points year to date. The small-cap edge has since widened to nearly five percentage points, as of yesterday’s close (June 13).
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Macro Briefing: 14 June 2018

South Korea will consider changes to military policy for N. Korea: Reuters
European Central Bank set to wind down monetary stimulus: Reuters
Trump says he’ll confront China “very strongly” on trade: Bloomberg
US, Saudi Arabia and Russia agree on goal of lower energy prices: NY Times
China industrial output up 6.8% in May, just below expectations: RTT
Fed raises interest rates and expects two more in 2018: MarketWatch
Fed policy suggests an inverted yield curve is near: Bloomberg
Median Fed US GDP growth forecast for 2018 ticks up to 2.8%: CNBC
US producer prices post biggest annual gain in over 6 years in May: Reuters
Firms’ inflation outlook mostly unchanged at 2.1% for year ahead: Atlanta Fed
10-2-year Treasury spread dips below 40 basis point for first time since 2007:

Will The Yield Curve Continue To Flatten After Today’s Rate Hike?

The Federal Reserve is widely expected to raise interest rates today, a policy move that may further squeeze the difference between short and long Treasury yields. If the already narrow rate spread continues to tighten, the ongoing slide will raise new questions about the outlook for the US economy, at least in the eyes of some economists and investors.
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Macro Briefing: 13 June 2018

Key takeaways from Trump-Kim summit: The Hill
N. Korean media highlights US concession on war games: Reuters
Eurozone industrial output fell in Apr, ahead of ECB meeting: WSJ
Saudi-led forces unleash new assault in Yemen: Time
Federal Reserve expected to raise interest rates today: Yahoo Finance
Key questions that may come up in today’s Fed press conference: MW
Federal judge OKs AT&T deal to buy Time Warner: Bloomberg
Small business optimism index in US rose to 34-year high in May: Bloomberg
US consumer price inflation in May rose at fastest pace in 6 years: MW

Will Trump’s Meeting With North Korea’s Kim Lead To Peace?

Talking about peace is always better than threatening war. By that standard, President Trump’s historic meeting with North Korea’s Kim Jong-Un – the first time a sitting US president has met with a North Korean leader – can be called a success. But the lack of substance, other than a joint statement announcing a goal to denuclearize the Korean peninsula at some point in the future, is a reminder that the photo optics are easy. Genuine, verifiable progress, on the other hand, is hard and on that front it’s not yet obvious that anything has changed with respect to North Korea.
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Macro Briefing: 12 June 2018

Trump and N. Korea’s Kim sign agreement to de-nuke Korean peninsula: Reuters
US opens new defacto embassy in Taiwan, angering China: Reuters
Will another Fed rate hike set off recession alarm? WSJ
US Treasury imposes sanctions on Russian individuals and companies: Reuters
Internet neutrality ended on Monday: Here’s what to expect: The Verge
ETF price war spreads to fixed income and gold funds: FT
A closer look at demographics as a factor in slower growth: VoxEU
US consumer inflation expectations in May hold steady at 3.0%: NY Fed
Fed funds futures pricing in 96% probability for rate hike on Wed (June 13): CME

Macro Briefing: 11 June 2018

Trump attacks key US allies on trade: BBC
Trump says Tuesday’s US-N. Korea summit could “work out very nicely”: Reuters
Germany’s Merkel: EU will respond to US tariffs: Reuters
Economists expect Fed to continue gradual rate hikes: Bloomberg
Upcoming OPEC meeting may be contentious amid calls for higher output: OilPrice
US wholesale inventories tick higher in April: Reuters
Small-cap stocks (Russell 2000) continue to beat large caps (S&P 500) in 2018:

Book Bits | 9 June 2018

The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era
By Barry Eichengreen
Review via Foreign Affairs
In this survey of two centuries of populist movements and political revolts in Western democracies, Eichengreen argues that from the Luddites in early-nineteenth-century England to the upheavals of the interwar period, economic insecurity, labor dislocations, and rising inequality fueled backlash politics. Yet not all periods of economic hardship generate populist revolts, and not all populist revolts succeed. Eichengreen shows that populism tends to thrive most when economic insecurity exposes the divergent interests of the people and the elites. Societies become particularly ripe for populist backlashes in the wake of financial crises that lead to bailouts for plutocrats.
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Is There A “Soft Data” Problem For Business Cycle Analysis?

Two analysts recently warned that so-called soft economic data has become less reliable for profiling the macro trend. “We believe the soft data, and subsequent forecasts, are suffering from a circular reference due to groupthink, herd mentality and political preferences,” Jim Bianco (Bianco Research) and Ben Breitholtz (Arbor Research & Trading) opined last month. If they’re right, indicators such as the ISM Manufacturing Index and the University of Michigan Consumer Confidence Survey offers less insight for monitoring the business cycle.
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