Everyone talks about fat tails in markets, but how do you model it in an effort to estimate what may be lurking in the future? There are many possibilities, along with lots of statistical baggage. The main challenge is that trying to squeeze reality into one distribution to capture how markets actually work is challenging, to say the least. But the head of global multi-asset strategies at T. Rowe Price outlines a simple and arguably better approach in a new book on asset allocation.

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House speaker and Senate majority leader resume talks on stimulus deal: CNBC
Moderna: vaccine has ‘potential’ to offer longer-term immunity: MW
Biden and three former presidents pledge to publicly take a vaccine: USAT
Should US policymakers stop worrying and learn to love debt? NYT
Softest gain in 6 months expected for today’s November payrolls report: RTRS
Demand for inflation-protected securities surges: FT
German factory orders rose in Oct, level above pre-crisis level: BBG
Global growth ticked lower in November but remained “solid”: IHSM
US jobless claims fell last week, perhaps due to Thanksgiving holiday: WSJ
US Services PMI: sector growth accelerated to five-year high in November: IHSM
Conflicting with PMI, ISM Non-Mfg Index reflects softer growth in November: ISM

The Treasury market’s inflation forecast broke above its pre-pandemic high this week, fueling speculation that a new era of firmer pricing pressure is dawning. Maybe, but there are still good reasons to remain cautious before declaring that inflation is at a critical turning point. There’s a case for reviving the pre-pandemic outlook for roughly 2% inflation, but expecting a substantially hotter run still relies heavily on guesswork and dismissing the secular trends — an aging demographic, disinflationary pressure via technology, and other factors — that have prevailed over the past 20 years.
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Negotiations in Congress continue for coronavirus-stimulus bill: WSJ
US posts record number of Covid-19 hospitalizations: BBC
Americans face ‘rough’ winter due to surging coronavirus, CDC chief warns: RTRS
House passes bill that may delist Chinese firms from US stock exchanges: CNBC
China services sector growth accelerated in November: RTRS
Eurozone economic activity contracted in Nov, PMI survey data shows: IHSM
UK economic activity contracted in Nov via PMI survey data: BBG
Survey: economic fear rises sharply among Republicans after election: NYT
Fed Beige Book: US economic rebound gathered momentum recently: WSJ
US companies hired fewer workers than expected in November: BBG

The expected risk premium estimate rose for The Global Market Index (GMI), increasing to an annualized 5.3% in today’s revision. That’s a relatively sizable jump relative to last month’s forecast. The estimate represents a long-run projection for the index’s performance over the “risk-free” rate via a risk-based model (details below).

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UK approves Pfizer-BioNTech coronavirus vaccine: CNBC
Trump may veto defense bill over social media protections: AP
Biden says he won’t immediately remove Trump’s tariffs on China: CNBC
Biden’s economic team recommends quick action on stimulus: NYT
Global manufacturing increased in Nov at fastest pace since Jan 2018: IHSM
10-year Treasury yield rises sharply, near 1%: BBG
German retail spending rose more than expected in October: RTRS
US construction spending rebounded in October: MW
US Mfg PMI signaled continued acceleration in growth: IHSM
US ISM Mfg Index: sector growth slowed in November: RTRS

November was unusually kind to risk assets, delivering another clean sweep of gains. For a third month this year, all the major asset classes rallied. From the smallest of fractional increases in cash (a gain of one basis point) up to the dramatic 15%-plus rally in stocks in foreign developed markets, a bullish wave lifted all boats last month — again, following across-the-board increases in May and July.
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Moderna requests approval for its Covid-19 vaccine: WSJ
Biden chooses liberal-minded economic team: AP
Fed Chairman Powell: economic outlook ‘extraordinarily uncertain’: CNBC
China’s Nov mfg activity rose to highest level in a decade: IHSM
Eurozone Mfg PMI held on to moderate gain in Nov: IHSM
UK mfg survey data show sector activity strengthened in Nov: IHSM
Exxon Mobil will sharply cut exploration and production spending: NYT
Chicago PMI: business conditions slowed in Nov: MW
Dallas Fed Mfg Index: sector growth slowed sharply in Nov: MSTAR
US pending home sales fell for a second month in Oct: BBG