New filings for jobless benefits declined a hefty 27,000 last week to a seasonally adjusted 341,000—just over the five-year low of 330,000 for the week through January 19, 2013. This is a volatile series and so it’s best not to read too much into today’s number. That said, the latest drop is another data point in line with the trend in recent history that reflects slow but persistent healing in the labor market.
Monthly Archives: February 2013
Retail Sales Inch Higher In January
As expected, retail sales eked out a gain in January, rising a seasonally adjusted 0.1% over the previous month, the Census Bureau reports. The rise is unimpressive, arguably due to higher tax rates that kicked in as the new year began. But the fact that consumption held its ground after two months of decent increases suggests that the appetite for spending still has the capacity for forward momentum.
US Retail Sales: Jan 2013 Preview
Tomorrow’s report on retail sales for January is projected to show a 0.2% gain for the month, according to The Capital Spectator’s average econometric forecast. That’s slightly higher than the consensus forecasts from several surveys of economists. In all cases, the January projections are below the 0.5% gain reported by the Census Bureau last month.
Are Large-Cap Value Stocks At A Bullish Turning Point?
Has the drought for the large-cap value risk premium run its course in the US stock market? Reviewing recent history suggests a cautious “yes,” based on comparing the rolling two-year cumulative performance spread for the Russell 1000 Value Index less the Russell 1000 Growth Index.
Tactical ETF Review: 2.11.2013
The punditocracy is calling it the great rotation—selling bonds and buying stocks in 2013. Just as this buzz-phrase went viral, so did the warnings that the trend isn’t long for this world. Perhaps, but the momentum in favor of equities is certainly transparent so far in 2013. Reviewing our set of ETF proxies for the major asset classes reflects handsome gains for stocks and varying degrees of the opposite for bonds. Actually, let’s clarify: stocks in developed markets have popped recently. Equities in so-called emerging realms are slightly in the red for the year so far through February 8, in US dollar terms.
Book Bits | 2.9.13
● The Great Convergence: Asia, the West, and the Logic of One World
By Kishore Mahbubani
Summary via publisher, Public Affairs
The twenty-first century has seen a rise in the global middle class that brings an unprecedented convergence of interests and perceptions, cultures and values. Kishore Mahbubani is optimistic. We are creating a new global civilization. Eighty-eight percent of the world’s population outside the West is rising to Western living standards, and sharing Western aspirations. Yet Mahbubani, one of the most perceptive global commentators, also warns that a new global order needs new policies and attitudes.
Research Review | 2.8.2013 | The Business Cycle
Sell Side Recommendations during Booms and Busts
Dieter Hess (University of Cologne), et al. | January 2013
Our study documents that the information content and the information processing of stock recommendations differ fundamentally between expansions and recessions. The initial market reaction to all recommendations is more intense in recessions, but “Buy” recommendations do not have long-term investment value. We find that in recessions sell side analysts are too optimistic about stocks they recommend to buy, while investors initially overreact to these recommended stocks. In expansions, no such contradicting pattern exists. We also document that analysts favor “glamour” over “value” stocks irrespective of the state of the economy.
Jobless Claims Trend Lower, Supporting A Moderate-Growth Outlook
Today’s update on weekly jobless claims continues to signal growth for the labor market in the near term. Yes, it’s a modest pace of growth, but it’s likely to roll on for the foreseeable future. That’s the message once again in today’s report on new filings for unemployment benefits, which fell 5,000 last week to a seasonally adjusted 366,000, the Labor Department reports. Indeed, new claims are approaching the levels that prevailed before the last recession started. Combined with this week’s upbeat news in the January readings of the ISM Manufacturing and Non-Manufacturing indices, today’s claims report offers another data point for thinking that 2013 is off to a decent start. We’ll know more once all the January numbers are in, but the preliminary indicators to date leave plenty of room for optimism.
Mr. Market’s Abnormal Relations: An Update
Why is the stock market up? Or down? There are countless theories, but one that resonates in recent years is linked to what I refer to as the new abnormal. This is the positive connection between the stock market and the implied inflation forecast via the yield spread between the 10-year Treasury Note and its inflation-indexed counterpart. In the grand scheme of economic history, higher inflation isn’t all that inspiring for the equity market. But this relationship has been turned on its head in recent years. Why? Well, a few things changed in the wake of the Great Recession. As a result, higher (lower) inflation expectations have remained closely bound with higher (lower) stock prices. This odd connection won’t last forever, but reviewing the latest numbers reminds that this abnormality continues to dominate… for now.
Carving Up The Global Bond Market
On Monday, I divided the world’s equity markets into relative market-value weights for some perspective on asset allocation. The global bond market deserves no less, and so I dive into the numbers below. But first, a caveat. Categorizing the planet’s supply of fixed-income components is complicated. Equities, by contrast, are a breeze. In the interest of brevity here, I’m streamlining the task, although no one should confuse the data that follows as the final world on defining the global bond market. For instance, I’m leaving out US munis and collateralized debt the world over. Those are subjective choices, but then again that’s par for the course when it comes to setting up rules for investing in bonds. There’s relatively little debate when it comes to establishing benchmarks for equities. Bonds, by contrast, are another matter entirely.