Cash is no longer trash, courtesy of sharply higher interest rates. Trailing yields on risky assets are looking up too.
Macro Briefing: 23 February 2023
* Putin says China President Xi will visit Russia
* Fed minutes: officials remain set on more rate hikes to tame inflation
* US proposes first offshore wind auction in Gulf of Mexico.
* Several popular Chinese apps remove access to AI chatbot ChatGPT
* US home-purchase applications tumble to 28-year low
* US mortgage rates rise to highest level since November:
Early Median Estimate For US GDP In Q1 Skews Slightly Negative
The economic rebound in the second half of 2022 looks challenged in early estimates for first-quarter GDP, based on the median for a set of nowcasts compiled by CapitalSpectator.com.
Macro Briefing: 22 February 2023
* Biden to meet eastern NATO flank after Poland visit
* US may impose new sanctions on China for its economic support of Russia
* Russia will suspend last remaining U.S.-Russia arms control treaty
* Walmart turns cautious on economic outlook
* Amazon has approval from FTC to acquire One Medical primary-care clinics
* Existing home sales in US fall for 12th straight month in January
* US business activity rebounds in February via PMI survey data:
Oversold-Overbought Watch: S&P 500 Index | 21 February 2023
The low-hanging fruit has been picked. Casual observation suggests as much. The S&P 500 Index has rebounded sharply off its previous low in October, closing up 14% on Friday (Feb. 17) since October’s trough.
Macro Briefing: 21 February 2023
* Supreme Court case could change immunity standard for Big Tech’s social media
* China is mobilizing its courts to undermine foreign intellectual-property rights
* The Fed’s preferred inflation gauge is expected to run hot in Friday’s update
* Eurozone rebound in business activity accelerates in February
* UK private sector grows in February after six-month decline
* US earnings decline for companies expected in Q1 and Q2, analysts predict
* US Leading Economic Index continues to signal high recession risk, CB reports:
Happy President’s Day!
“You cannot escape the responsibility of tomorrow by evading it today.”
– Abraham Lincoln
Book Bits: 18 February 2023
Steven Ricchiuto
Interview with author via Yahoo Finance
Financial markets are being driven by excessive liquidity at a time when both bond and equity markets are expensive, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York. “As people come to the realization that the Fed is going to be higher for longer and we don’t yet know what the higher is, even if they pause I still think the next move is a rate hike, not a rate cut,” he said.
Research Review | 17 February 2023 | Risk Analysis
Submergence = Drawdown Plus Recovery
Dane Rook (Stanford University), et al.
February 2023
Drawdowns and recoveries are often analyzed separately – yet doing so can leave investors with a distorted view of risk. Indeed, this problem is so commonplace that there’s no consistently-used term for the joint event of a drawdown plus its subsequent recovery. We propose the term ‘submergence’ for such events, and present a new risk metric to help investors analyze them: submergence density. Submergence density overcomes pitfalls of existing metrics, and also allows investors to inject elements of their own risk tolerances, thereby ‘personalizing’ it to their own contexts. Submergence density also offers an alternative method for risk-adjusting returns (with multiple advantages over current methods, such as Sharpe ratios). We use our new risk-adjustment approach to study key markets, and show how it leads to novel diversification strategies. We compare these strategies with other defenses against submergence risk, and conclude that submergence-based diversification is likely the best way for most investors to handle the threat of drawdowns.
Macro Briefing: 17 February 2023
* Pentagon’s top China official is visiting Taiwan
* US mortgage rates rise for second week–average 30-year fixed at 6.32%
* Consumer sector in US showing new signs of resilience
* Will optimism in financial markets strengthen Fed’s hawkish monetary bias?
* US wholesale prices re-accelerate in January–new warning sign for inflation
* Philly Fed Manufacturing Index falls sharply in February
* US housing starts fall in January–lowest level since pandemic was raging in 2020:
