The S&P 500 has been rallying in recent weeks, recovering all of the ground it lost in January and February. The sharp rebound has been impressive, inspiring optimists to claim that the old bull market has been revived and upside momentum is once again in the driver’s seat. Perhaps, but the true test awaits. Hanging in the balance is the question of whether the latest pop is a dead-cat bounce in a bear market or a genuine revival that makes fools of tactical asset allocators who turned cautious in recent months.
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● US economy ran below trend in Feb, Chicago Fed says | MarketWatch
● US existing home sales tumble in warning sign for housing | Reuters
● Fed’s Lockhart: April Rate Hike On The Table | RTT
● PMI: Eurozone growth turns higher for first time in 3 mos | Markit
● PMI: Solid service sector growth for Germany vs. slower mfg | Markit
● Eurozone Consumer Confidence Down for 3rd Straight Month in Mar | WSJ
● Uncertainty Still Hangs Over the Global Economy | Dallas Fed

The US economy continued to expand through last month at a moderate pace, albeit at a rate that’s slightly below the historical trend, according to this morning’s update of the Chicago Fed National Activity Index. The business-cycle benchmark’s three-month average (CFNAI-MA3) ticked up to -0.07 in February, close to The Capital Spectator’s projection. The main takeaway: recession risk remained relatively low through last month, a message that echoes last week’s US macro profile.
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Positive momentum prevailed again last week for the major asset classes, based on a set of proxy ETFs. For the fifth consecutive week through Friday, Mar. 18, the risk-on trade delivered another round of profits across the board. The trailing one-year period still reflects plenty of damage, but the red-ink brigade continued to retreat on this front, leaving the field evenly split among winners and losers.
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● UoM’s US Consumer Sentiment Index falls to 5-mo low in Mar | UoM
● US business inflation expectations stable at 1.8% in Mar | Atlanta Fed
● Richmond Fed’s Lacker: Inflation Expectations Well Anchored | MNI
● ECB Can Cut Rates Further If New Shocks Emerge | RTT
● China’s central banker: High corporate debt is a risk | CNN
● Obama to meet Raul Castro on historic Cuba trip | Reuters

● Conspiracies of the Ruling Class: How to Break Their Grip Forever
By Lawrence B. Lindsey
Review via Kirkus Reviews
In this bellicose case for the protection of liberty as envisioned in 1776 by the Founding Fathers, Lindsey (The Growth Experiment Revisited: Why Lower, Simpler Taxes Really Are America’s Best Hope for Recovery, 2013, etc.), CEO of the Lindsey Group, a global consulting firm, and former director of the National Economic Council, argues that there has always been a ruling class in society comprising individuals who think they are “superior beings placed on earth to be its rulers.” Acting out of a need to seize and wield power, these politicians and bureaucrats spend their lives ensconced in government, disguised as humble public servants interested in serving the less fortunate. They are actually focused solely on consolidating their own power and telling others how to live. Today, in the United States, these rulers deem themselves progressive, or liberals, and “smarter than a group they term conservatives.” Their progressive ideology, writes the author, “dominates our society.” Thus, to the probable surprise of many liberal readers who believe that the wealthy elite known as the 1 percent has America in shackles, Lindsey suggests that progressives are the culprits behind our current woes.
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The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to tick higher in the February update that’s scheduled for Monday (Mar. 21), based on The Capital Spectator’s average point forecast for several econometric estimates. The average projection for -0.08 reflects a slight improvement over the previous month, which indicates US economic activity running moderately below the historical trend rate of growth. Only values below -0.70 signal an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s average estimate for February as a guide, CFNAI’s three-month average is expected to confirm an expansion that’s moderately below the historical trend but well above the tipping point that marks the start of a new US recession.
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The US stock market continued to climb out of a hole yesterday. The S&P 500 closed at its highest level so far this year. Yesterday’s rise comes a day after the Federal Reserve decided to hold off on rate hikes, citing increased macro risks–here and abroad. But if equities are reacting positively to revived expectations for keeping interest rates lower for longer, is the commensurate rise in the Treasury market’s inflation forecast a potential spoiler for the newly minted party in the stock market?
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● Streak of Low Jobless Claims Longest in More Than 4 Decades | WSJ
● US Job Openings Increased in Jan to 5.54 Million | Bloomberg
● US Job Market’s January Stumble Likely to Prove Temporary | AP
● US Leading Economic Index ticks higher in Feb | CB
● US Consumer Comfort Index Increased Last Week to 1mo high | Bloomberg
● Philly Fed mfg index turns positive–first time in 7 months | MarketWatch
● Dow closes positive for year as commodities rally, dollar dives | Reuters

Recent economic reports suggest that the US economy will continue to grow at a modest pace. Although macro risk has increased in recent months, the probability is low that a recession started last month and the near-term outlook suggests that the economy will continue to sidestep a new downturn, based on current data.
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