The recession-is-always-imminent crew took it on the chin again today via upbeat data on private payrolls in November. US companies added 216,000 workers (seasonally adjusted) this month, according to the ADP Employment Report. The gain—the largest in five months—gives the Federal Reserve more ammunition for arguing that the economy is strong enough to warrant raising interest rates at next month’s FOMC meeting.
Continue reading →

The rebound in US economic growth in the third quarter is looking vulnerable in Q4, according to recent estimates from several sources. If the projections are accurate, the 2.9% pace in Q3 (the highest rate in two years) is headed towards 2.0%. That’s still an improvement over the sluggish pace in the previous three quarters (Q4:2015 through Q2:2016), but the latest estimates for Q4 point to a softer macro trend in this year’s final three months.
Continue reading →

Commodities popped last week, posting the strongest weekly gain among the major asset classes, based on a set of proxy ETFs. Supported by expectations of higher inflation, broadly defined commodities led the way higher by a wide margin in the holiday shortened trading week through Friday, Nov. 25.
Continue reading →

The President has proclaimed today a National Day of Thanksgiving and The Capital Spectator is eager to yield to his authority on this matter. In fact, your editor herewith extends and ratifies this holiday edict through the weekend. The usual routine returns on Monday, Nov. 28. Happy Thanksgiving!

In another sign that the Federal Reserve is preparing to raise interest rates, the real (inflation-adjusted) M0 money supply’s decline picked up speed in October. The 13.4% year-over-year decrease is the steepest on record (dating to 1948) and marks a sharp drop from September’s 8.8% slide.
Continue reading →

Interest rates have increased moderately since Donald Trump’s election victory two weeks ago and analysts say that yields may trend higher in the months ahead. What does that imply for the stock market and the economy? As a preliminary answer, let’s model the possibilities by analyzing the historical record since 1960 for changes in interest rates and three key macro variables.
Continue reading →

US high-yield bonds led the way higher last week among the major asset classes, based on a set of representative ETFs. Although interest rates increased over the five trading days through Friday, the advance in investment-grade yields—Treasuries in particular—overwhelmed the higher rates in junk bonds. As result, the rate spread for high yield bonds less Treasuries (based on the BofA Merrill Lynch Option-Adjusted Spreads Index) ticked lower, boosting junk bond prices in the week just passed.
Continue reading →

● The Great Convergence: Information Technology and the New Globalization
By Richard Baldwin
Review via The Economist
Bill Clinton once called globalisation “the economic equivalent of a force of nature, like wind or water”. It pushes countries to specialise and swap, making them richer, and the world smaller. In “The Great Convergence”, Richard Baldwin, a Geneva-based economist, adds an important detail: like wind and water, globalisation is powerful, but can be inconstant or even destructive. Unless beloved notions catch up with reality, politicians will be pushed to make grave mistakes.
Continue reading →

Recession risk in the US remains low in the wake of several upbeat economic. Retail sales and residential housing construction in particular posted firmer numbers for October. Industrial output was flat last month, but the mildly negative annual trend continues to move closer to zero, driven by modest growth in the manufacturing sector. Meanwhile, the labor market still looks poised to expand. Payrolls continued to rise in October and growth looks poised to continue in the near term based on yesterday’s news that jobless claims dropped to the lowest level since 1973.
Continue reading →

Do you expect a recession… soon? Of course you do because you’re constantly bombarded with predictions that a new downturn is imminent—year after year. According to a variety of “experts,” the US has been on the cusp of a new contraction ever since the last recession ended more than seven years ago. Yet the US economy has continued to expand, albeit in fits and starts and delivering subpar results relative to the historical record. But for the moment, the recovery that began in mid-2009 remains in force, based on the latest numbers published to date.
Continue reading →