* Escalating attacks on US troops and shipping threaten wider Middle East war
* How did so many economists mistakenly forecast a US recession?
* 76% of economists see US recession risk at 50% or less in next 12 months
* US home prices post biggest gain of 2023 in October
* Texas factory activity stabilized in December after November contraction
* US economic activity rebounds in November–Chicago Fed Nat’l Activity Index:
The US bond market has had a rough ride for much of the past two years, but the powerful rally over the last two months suggests the worst is over. Cherry-picking analytics from the recent crop of 2024 outlooks that are seasonal standards this time of year provides inspiration for thinking that the new year could reverse more (all?) of the damage inflicted on fixed income since the Federal Reserve starting raising interest rates in March 2022.
* US strikes Iran-backed militias in Iraq
* Geopolitical risk and 50 elections lurking for world economy in 2024
* Inflation around the world is slowing faster than expected, but…
* Residual high inflation has soured consumers’ views of economy
* 12 reasons to remain bullish in 2024: Yardeni Quicktakes
* Economists expect inflation will return to “normal” in 2024
* PCE inflation, Fed’s preferred price gauge, rises less than expected in Nov:
It’s time once more to look back on CapitalSpectator.com’s weekly Book Bits column and pluck a few of the more memorable titles from the archives. Per the usual routine, as each year draws to a close, we revisit ten books from 2023’s travels — titles that, for one reason or another, caught your editor’s eye and deserve another look before New Year’s celebrations commence. We’ll start with five today, followed by the balance in a week. Happy reading!
Visions of sugar plums aren’t yet dancing in my head, but I thought I heard the laugh of a right jolly old elf. Or was it the neighbor’s cat? No matter — the world headquarters of The Capital Spectator is now closed, reopening on Tuesday, Dec. 26. Meanwhile, excuse me as take my leave like the down of a thistle. Cheers!
Factor Zoo (.zip)
Alexander Swade (Lancaster University) et al.
October 2023
The number of factors allegedly driving the cross-section of stock returns has grown steadily over time. We explore how much this ‘factor zoo’ can be compressed, focusing on explaining the available alpha rather than the covariance matrix of factor returns. Our findings indicate that about 15 factors are enough to span the entire factor zoo. This evidence suggests that many factors are redundant but also that merely using a handful of factors, as in common asset pricing models, is insufficient. While the selected factor styles remain persistent, the specific style representatives vary over time, underscoring the importance of continuous factor innovation.
* Small group of Wall Street economists still see US recession lurking, but…
* Fear of recession is starting to fade for Americans
* Warner Bros in merger talks with Paramount
* 5 portfolio lessons from 2023, including: Don’t Fight the Fed
* US existing home sales rise in November–first gain in 5 months
* US Consumer Confidence Index rebounds sharply in December:
Markets are becoming increasingly confident that the Federal Reserve will start cutting interest rates in 2024. The first cut is expected at the March 20 monetary policy meeting.
* Red Sea chaos will cause shipping delays, drive up goods prices
* Democrats urge Biden to follow Europe’s lead and require stricter tech regs
* Canada to require all new autos to be zero-emission by 2035
* 44% Of US office loans underwater, which suggests high bank-failure risk
* US housing starts rise sharply, beating expectations by wide margin in Nov:
The S&P 500 Index’s rise in recent weeks puts it within shouting distance of its record high, set in January 2022. Yet some analysts warn that the narrow leadership of Big Tech stocks leaves the market vulnerable.