The bull run in US equities in recent years strikes many investors as something other than a run-of-the-mill rally. Although Mr. Market has dispensed several sharp corrections, it’s hard to overlook the fact that a buy-and-hold strategy for, say, an S&P 500 Index fund has been a mostly non-stop party of late. Is that unusual? The answer depends on your definition of “unusual” and your choice of a time window. For some perspective, let’s stack up the latest trailing performances for the S&P against its track record through the decades.
Continue reading →

Bolton willing to testify but no sign Senate will issue subpoena: Politico
White House denies visa to Iranian diplomat to attend UN meeting: The Hill
Does escalating US-Iran conflict offer strategic opportunities for China? CNN
France and EU prepare to respond to new US tariffs: AP
Global growth picked up in December via PMI survey data: IHS Markit
Is latest jump in Eurozone inflation, retails sales a temporary bounce? ING
US Services PMI: moderate growth picked up to 5-month high in Dec: IHS Markit

The trading week begins with a spike in uncertainty following last week’s US airstrike that killed Qassem Soleimani, Iran’s top military official. Although most of the major asset classes posted gains last week and still reflect across-the-board profits for the one-year trend, repricing risk has become substantially more challenging – and critical.

Continue reading →

Sec. of State Pompeo warns Iran against attacks on US interests: NY Times
Trump threatens Iraq with sanctions after US troops asked to leave: BBC
Huge crowds mourn Iran’s military commander at funeral in Tehran: Reuters
House to vote on limiting Trump’s military powers re: Iran: CNBC
Confusion hangs over Trump’s Middle East strategy after Soleimani Killing: BBG
NY Fed president: US should stick to 2% inflation target: WSJ
Monetary experts question if Fed can effectively fight next recession: MW
Brexit economic uncertainty spreads near and far: BBG
Revised Eurozone PMI: economy remained near stagnation in Dec: IHS Markit

● The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis
By Tim Lee, et al.
Summary via publisher (McGraw-Hill)
Protect yourself from the next financial meltdown with this game-changing primer on financial markets, the economy—and the meteoric rise of carry. The financial shelves are filled with books that explain how popular carry trading has become in recent years. But none has revealed just how significant a role it plays in the global economy—until now. The Rise of Carry explains how carry trading has virtually shaped the global economic picture—one of decaying economic growth, recurring crises, wealth disparity, and, in too many places, social and political upheaval. The authors explain how carry trades work—particularly in the currency and stock markets—and provide a compelling case for how carry trades have come to dominate the entire global business cycle.
Continue reading →

The Global Market Index’s expected risk premium ticked higher again in December, marking the fourth straight monthly rise. The latest advance lifts GMI’s long-term ex ante return to an annualized 5.0% (before factoring in a “risk-free” rate).

Continue reading →

Iran vows revenge after US strike kills top Iranian commander: Reuters
Will world economy suffer blowback following US strike on Iranian general? BBG
Some observers see dangerous escalation in US killing of Iranian general: CNBC
Oil prices surge, stock futures sink following US strike on Iranian: MW
US Mfg PMI continued to reflect modest rebound in December: IHS Markit
Job cuts in the US fell in Dec to lowest level since July 2018: CG&C
US jobless claims fell last week, close to 50-year low: MW

It was a very good year for investors in 2019. So good, in fact, that it was impossible to lose money last year with simple buy-and-hold strategies that owned one or more of the major asset classes.
Continue reading →

Protests at US embassy in Iraq reflect Iran’s influence: NY Times
Taiwan’s top military chief among dead in helicopter crash: CNN
Israel’s Netanyahu seeks parliamentary immunity from prosecution: BBC
Hundreds of Hong Kong protesters arrested: Reuters
UK mfg output fell at fastest rate in 7-1/2 years in Dec: IHS Markit
Eurozone mfg recession continued in December: IHS Markit
China’s mfg sector continued to post a mild rebound in Dec: IHS Markit
Recession is a top concern for CEOs in 2020: WSJ
10yr Treasury yield ended 2019 near 5-month high: