Economic activity weakened slightly in May, but it’s too soon to say if this is anything more than noise. The broad trend for the US was still solidly positive through last month and near-term projections look encouraging.
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Author Archives: James Picerno
US REITs Continue To Rebound
US real estate investment trusts (REITs) posted the strongest performance last week among the major asset classes, based on a set of exchange-traded products. The gain extends a rebound for securitized real estate that began in mid-May.
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Book Bits | 17 June 2017
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By Scott Nations
Review via Publishers Weekly
Nations (The Complete Book of Option Spreads and Combinations), a CNBC contributor, offers a fascinating look at five major stock market crashes: the Panic of 1907, Black Tuesday, Black Monday, the Great Recession, and the Flash Crash. Nations observes that stock market crises mean more than just tanking investment accounts. They also stop people from investing, impacting job availability and the economy as a whole. While these failures don’t have a single cause that is easy to recognize beforehand, he asserts that all five studied here share important indicators.
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Research Review | 16 June 2017 | Yield Curve Analysis
Monetary Policy Uncertainty and Bond Risk Premium
Fuwei Jiang (Central University of Finance and Economics) and
Guoshi Tong (Renmin University)
October 1, 2016
We show that uncertainty of monetary policy (MPU) commands a risk premium in the US Treasury bond market. Using the news based MPU measure in Baker, Bloom, and Davis (2016) to capture monetary policy uncertainty, we find that MPU forecasts significantly and positively future monthly Treasury bond excess returns. This forecastability remains significant controlling for standard bond risk premium predictors based on yield curve and macroeconomic fundamentals. The predictive power of MPU is not driven by uncertainty of economic growth, inflation and general economic condition, and is confirmed in out-of-sample tests.
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10-Year Treasury Yield Drops Despite Fed Rate Hike
The Federal Reserve on Wednesday hiked interest rates again, asserting that moderate economic growth will continue for the foreseeable future. But confidence appeared to be in short supply via the benchmark 10-year Treasury yield, which slumped amid rising demand for this safe-haven asset.
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Is A Tightening Yield Spread Still A Warning Sign For The Economy?
The Federal Reserve is expected to raise interest rates today – at a time when the Treasury yield spread has become relatively compressed. That’s a warning sign, according to the historical record. The question is whether the shelf life for this analysis has expired?
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Is Inflation Strong Enough To Warrant Another Rate Hike?
The Federal Reserve is conducting a grand experiment in monetary policy that’s set to continue in tomorrow’s policy statement, which is expected to roll out another hike in interest rates. The experiment is tightening policy when inflation and employment growth are still low and perhaps heading lower.
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Most Markets Declined Last Week
The first full week of trading in June took a bite out of most markets. Only US real estate investment trusts (REITs) and broadly defined commodities bucked the downward trend for the major asset classes last week, based on a set of representative exchange-traded products.
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Book Bits | 10 June 2017
By Gary Smith
Review via NY Times
“Instead of trying to predict short-term zigs and zags in stock prices, value investors evaluate individual stocks and the market as a whole by looking for good companies that have low stock prices relative to their dividends, earnings and assets,” he writes….
Throughout the book, Mr. Smith provides financial formulas to help you identify value stocks, and his writing is clear and often clever. For example:
* “Bargains are not going to be found when investors are optimistic, but when they are pessimistic.”
* “Value investors do not buy metals — no matter how precious — because metals do not generate cash.”
* “It’s tempting to confuse a great company with a great stock.”
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Another Forecasting Lesson After The UK’s Surprising Election
UK Prime Minister Theresa May’s gamble to call an early general election has backfired, dealing Britain an unexpected outcome that’s dealt another blow to the so-called experts who anticipated that the Conservatives would gain seats in Parliament. Instead, the electorate confounded the polls and forecasting models and delivered a major setback to May’s government. Once again, there are lessons to be learned about the hazards of forecasting, although assuming that all efforts at diving the future are wrong isn’t one of them.
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