The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat with the target Fed funds rate at a mildly positive 0.25%-0.50% range should be viewed as a minor victory in the global context of monetary policy these days. Holding rates steady at just slightly above zero may seem like the poster child for dovish policy in the grand scheme of central banking history. But there’s a hawkish aura to Fed policy relative to the negative rates that are creeping into the global economy in other corners.
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Author Archives: James Picerno
Initial Guidance | 27 April 2016
● Orders for US Durable Goods Rose Less Than Forecast in Mar | Bloomberg
● US Consumer Confidence Index slips in Apr | MarketWatch
● PMI: US service sector growth remains subdued in Apr | Markit
● Richmond Fed mfg survey: activity continued to expand in Apr | Richmond Fed
● US home prices in 20 cities rose in Feb | CNBC
● UK GDP growth slows to 0.4% in Q1 | Guardian
● Trump and Clinton edge closer to nominations | NY Times
Slower Growth Projected For US Q1 GDP
What a difference a month makes for anticipating Thursday’s “advance” GDP report for the first quarter. In late-March economists were projecting US growth at 1.5%-plus, perhaps even in the low-2% range by some accounts (seasonally adjusted annual rate). But expectations have fallen on hard times in recent weeks and the government’s preliminary estimate of economic output in Q1 has been cut to as low as 0.1% by one firm’s reckoning. Econoday.com’s consensus forecast of 0.7% is firmer, but this estimate still represents a sharp deceleration from the already sluggish 1.4% pace in last year’s Q4.
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Initial Guidance | 26 April 2016
● US New-home sales slip in March, after prior months revised up | MarketWatch
● Dallas Fed mfg index falls more than forecast in Apr | Business Insider
● Fed to Keep Options Open for June Rate Hike | Bloomberg
● Nearly Two-Thirds of Americans Prefer Saving to Spending | Gallup
● The Fed’s Inflation Fail | Narayana Kocherlakota (Bloomberg)
Commodity Prices Rise For 3rd Week In A Row
Last week’s performance leader: commodities, which posted a gain for the third week in a row, based on a set of ETFs that track the major asset classes. The rise has barely made a dent in the steep year-over-year loss that still weigh on commodities overall. But the rally so far this year for prices of raw materials generally is the strongest since the bear market started pinching these markets in 2014.
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Initial Guidance | 25 April 2016
● PMI: Weakest upturn in US mfg since Sep 2009 | Markit
● Fed seen holding rates this week with hike still on horizon | Reuters
● Lackluster GDP throws wrench into Fed’s rate-hike plans | Market Watch
● US Financial Stress Index just below “significant stress” level | Cleveland Fed
● Bond investors are taking bigger risks than ever before | Bloomberg
● German Business Confidence Weakened in April | Bloomberg
● The High Investing Fees You Don’t See Can Hurt You | NY Times
● Middle East Economies Facing Oil Revenue Falls, IMF Says | WSJ
Book Bits | 23 April 2016
● A Future Beyond Growth: Towards a steady state economy
Edited by Haydn Washington, Paul Twomey
Summary via publisher (Routledge)
A Future Beyond Growth explores the reason why the endless growth economy is fundamentally unsustainable and considers ways in which society can move beyond this to a steady state economy. The book brings together some of the deepest thinkers from around the world to consider how to advance beyond growth. The main themes consider the deep problems of the current system and key aspects of a steady state economy, such as population; throughput and consumerism; ethics and equity; and policy for change. The policy section and conclusion bring together these various themes and indicates how we can move past the growth economy to a truly sustainable future.
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PMI Data Points To A Weak Start For US Manufacturing In Q2
The prospects for a rebound in US manufacturing in the second quarter took a hit today with the initial April estimate of Markit’s Purchasing Managers’ Index (PMI) for the sector. The sentiment benchmark eased to its lowest reading in more than six-and-a-half years. The data is still reflecting growth, but at a sluggish rate.
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Research Review | 22 Apr 2016 | Risk Analysis
The Market Portfolio is NOT Efficient: Evidences, Consequences and Easy to Avoid Errors
Pablo Fernandez (University of Navarra), et al.
March 16, 2016
The Market Portfolio is not an efficient portfolio. There are many evidences that tell us that: the equal weighted indexes have beaten their market-value weighted indexes for many years, many easy-to-build portfolios (some “smart-beta”, “multifactors”) have beaten market-value weighted indexes. We document evidences about seven Equal weighted indexes that have had higher returns than the corresponding market-value weighted index: S&P500, MSCI Emerging Markets, FTSE 100, MSCI World. MSCI, DAX 30 and IBEX 35. However, many finance and investment books still recommend to diversify in the same relative proportions as in a broad market index such as the Standard & Poor’s 500, many funds compare their performance with the return of market-value weighted indexes. Without homogeneous expectations, the market portfolio cannot be an efficient portfolio for all investors.
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Initial Guidance | 22 April 2016
● US Jobless claims fall to 42-year low | MarketWatch
● Chicago Fed National Activity Index Ticks Lower in Mar | 24/7 Wall St
● Philly Fed Index Unexpectedly Returns To Negative Territory In Apr | RTT
● US Leading Economic Index ticks up in March | Conference Board
● US Consumer Comfort Index fell last week | Bloomberg
● US House Price Index edges up in Feb | Builder Mag
● PMI: Eurozone stuck in slow growth rut at start of Q2 | Markit
● BOJ Officials Consider Negative Rate on Loans | Bloomberg