What’s keeping long-dated bonds at the head of this year’s performance ledger for fixed-income markets? Recession worries still top the list, although nervous investors can point to this week’s renewed prospects for impeaching Trump as a factor, too. Whatever the driver, year-to-date returns for bonds continue to show that long maturities are running well ahead of the rest of the field, based on a set of ETFs that span the US fixed-income markets.

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Summary of Trump’s call to Ukraine president fuels impeachment debate: The Hill
A China trade deal may be near, says Trump: Reuters
Iranian President: talks with US contingent on ending sanctions: WSJ
UK Prime Minister Johnson’s remarks spark furor in Parliament: Bloomberg
Is the US stock market betting on a rally if Trump is impeached? CNBC
New home sales in the US rebounded in Aug, close to post-recession high: CNBC

The House of Representatives has formally launched an impeachment inquiry into President Trump, a turn of events with precious little history and so the investment implications are necessarily speculative. The crowd’s initial response: an orderly but determined move into safe havens, starting with Treasuries. Deciding what comes next is unclear, but it’s a reasonable guess that the political factor will remain front and center until further notice.

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Democrats launch formal impeachment inquiry on Trump: Reuters
Did Trump already admit to a crime in Ukraine crisis? Fox
Investors consider political risk anew after formal impeachment inquiry: MW
Gold strengthens as US political tensions rise: Bloomberg
China’s foreign minister: US should “remove all unreasonable restrictions”: CNBC
Mid-Atlantic region manufacturing activity eased in September: Richmond Fed
One-year trend for US home prices eased to 7-year low in July: Bloomberg
US consumer confidence stumbled in Sep, slipping to 3-month low: MW

Recession worries have become topical in recent months, but the odds are low that a smoking gun will be found in next month’s initial report on third-quarter GDP, according to a revised set of nowcasts. In fact, the current numbers reflect a slightly stronger outlook compared with estimates from early September.

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Ukraine controversy fuels talk of Trump impeachment: The Hill
Trump considers a new meeting with N. Korea’s Kim Jong Un: CNBC
US Treasury Secretary: trade talks to happen in 2 weeks: SCMP
German business sentiment rebounded in September: Reuters
Hard data on German mfg still heightens recession risk: Bloomberg
US economy continued to strengthen at a modest pace in Aug: Chicago Fed
US growth is slow but steady in September, PMI survey data shows: IHS Markit

Concerns over Saudi Arabia’s supply of crude oil drove commodities prices higher last week, delivering the strongest gain for the major asset classes, based on a set of exchange traded funds.

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Pressure to impeach Trump builds after new Ukraine revelations: NY Times
China cancels planned visit to US — at request of US: Bloomberg
Iran releases British-flagged tanker ahead of UN summit: WSJ
Iran’s president calls on Western powers to leave Persian Gulf: Politico
Arab parties in Israel back Gantz to end Netanyahu’s gov’t: BBC
UK Prime Minister Johnson: don’t expect Brexit deal in NY talks: Reuters
Hong Kong protests enter 16th week: CNN
Today’s Chicago Fed data for Aug is expected to show low recession risk
Eurozone’s economy has “virtually stalled” in September: IHS Markit

● Paper Dragons: China and the Next Crash
By Walden Bello
Summary via publisher (ZED Books)
Emerging relatively unscathed from the banking crisis of 2008, China has been viewed as a model of both rampant success and fiscal stability. But beneath the surface lies a network of fissures that look likely to erupt into the next big financial crash. A bloated real-estate sector, roller-coaster stock market, and rapidly growing shadow-banking sector have all coalesced to create a perfect storm: one that is in danger of taking the rest of the world’s economy with it. Walden Bello traces our recent history of financial crises – from the bursting of Japan’s ‘bubble economy’ in 1990 to Wall Street in 2008 – taking in their political and human ramifications such as rising inequality and environmental degradation. He not only predicts that China might be the site of the next crash, but that under neoliberalism this will simply keep happening.
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Momentum with Volatility Timing
Yulia Malitskaia (VKY Analytics)
July 9, 2019
The growing adoption of factor investing simultaneously prompted the active topic of factor timing approaches for the dynamic allocation of multi-factor portfolios. The trend represents a natural development of filling the gap between passive and active management. The paper addresses this direction by introducing the volatility-timed winners approach that applies past volatilities as a timing predictor to mitigate momentum factor underperformance for time intervals spanning the market downturn and post-crisis period. The proposed approach was confirmed with Spearman rank correlation and demonstrated in relation to different strategies including momentum volatility scaling, risk-based asset allocation, time series momentum and MSCI momentum indexes. The corresponding analysis generalized existing volatility scaling strategies and brought together the two branches of the smart-beta domain, factor investing and risk-based asset allocation.
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