Personal consumption spending for August is projected to rise 0.3% vs. the previous month in tomorrow’s update, based on The Capital Spectator’s average econometric forecast. In a rare case of unity, all five models are predicting a 0.3% gain (see table below). Today’s average projection represents an improvement over the previously reported 0.1% increase for July. Meanwhile, the Capital Spectator’s average 0.3% forecast for August is at the upper range of several consensus predictions based on surveys of economists.
Daily Archives: September 26, 2013
Jobless Claims: Still No Sign Of Blowback
Today’s weekly jobless claims update looks encouraging once again. New filings for unemployment slipped by 5,000 to a seasonally adjusted 305,000 last week, the Labor Department reports. Even better, there’s still no sign of blowback from the special factors that reportedly pushed claims down recently due to a computer glitch that affected the compilation of data in several states. Some analysts said that the claims numbers would soar in the wake of the extraordinarily steep and misleading drop two weeks ago. In fact, it’s fair to say that with each passing week, the case looks stronger for arguing that the decline in layoffs is genuinely accelerating. As usual, let’s allow the numbers to do the talking.
Research Review | 9.26.13 | Risk Analysis
Optimal Portfolios for the Long Run
David Blanchett (Morningstar), et al. | Sep 2013
There is surprisingly little agreement among academics about the existence of time diversification, which we define as the anomaly where equities become less risky over longer investment periods. This study provides the most thorough analysis of time diversification conducted, using 113 years of historical data from 20 countries (over 2,000 years of total return data). We construct optimal portfolios for 20 different countries based on varying levels of investor risk aversion and time horizons using both overlapping and distinct historical time periods.
We find strong historical evidence to support the notion that a higher allocation to equities is optimal for investors with longer time horizons, and that the time diversification effect is relatively consistent across countries and that it persists for different levels of risk aversion. We also note that the time diversification effect increased throughout the 20th century despite evidence of a declining risk premium. Although time diversification has been criticized as inconsistent with market efficiency, our empirical results suggest that the superior performance of equities over longer time horizons exists across global equity markets and time periods.