Fixed income showed some of its traditional diversification edge last week as selling took a toll elsewhere for the major asset classes, based on a set of ETFs through Friday’s close (May 13). It’s too early to confirm that bonds have started an extended rebound after a rough year, but last week’s bounce opens the door for debate.

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* Ukraine can win this war, says NATO chief
* Wheat prices rise globally after India’s export ban
* US consumer spending slowing, predicts Goldman Sachs economists
* China retail sales and industrial output fell more than expected in April
* Crypto prices show little diversification benefit vs. stocks and bonds
* US consumer sentiment falls to 11-year low in early May
* Is the policy-sensitive 2yr US Treasury yield peaking?

● Don’t Trust Your Gut: Using Data to Get What You Really Want in Life
Seth Stephens-Davidowitz
Summary via publisher (Dey Street/HarperCollins)
Big decisions are hard. We consult friends and family, make sense of confusing “expert” advice online, maybe we read a self-help book to guide us. In the end, we usually just do what feels right, pursuing high stakes self-improvement—such as who we marry, how to date, where to live, what makes us happy—based solely on what our gut instinct tells us. But what if our gut is wrong? Biased, unpredictable, and misinformed, our gut, it turns out, is not all that reliable. And data can prove this. In Don’t Trust Your Gut, economist, former Google data scientist, and New York Times bestselling author Seth Stephens-Davidowitz reveals just how wrong we really are when it comes to improving our own lives.

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The US stock market is sliding in what may or may not presage an extended decline. Whatever unfolds in the weeks and months ahead, the first order of business is recognizing that we’ve been here before by putting the current correction into historical perspective. There’s nothing new under the sun for market corrections, but it can appear otherwise if you’re overwhelmed with recency bias.

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* Russia says it will “retaliate” if Finland Joins NATO
* Finland wants to join NATO. Sweden may be next
* Fed Chair Powell says soft economic landing may be beyond Fed’s control
* US housing market showing nascent signs of cooling
* US wholesale inflation continues to accelerate in April
* Oil giant Saudi Aramco overtakes Apples as world’s most valuable company
* How will the next recession unfold? Here are several possibilities:

For the first time in 11 months, the US Treasury 10-year yield is above CapitalSpectator.com’s fair-value model estimate of the benchmark rate. That doesn’t ensure that the 10-year yield will stop rising, of course, but it provides a new talking point for considering why this key rate’s upward bias may moderate or even reverse in the near term.

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* Finland’s prime minister and persident announce support for joining NATO
* Will a prolonged Ukraine war and its economic fallout strain Western resolve?
* China’s economic slowdown is creating headwinds around the world
* China sticks with costly ‘zero Covid’ policy despite economic costs
* UK economy contracts in March as consumers reduce spending
* Bitcoin tumble continues, falling below $27,000 in early Thursday trading
* US annual consumer inflation eases in April but still near 40-year high:

In recent updates to this series (see list below) I’ve been looking at various methodologies to identify extreme values in a time series, such as the S&P 500 Index. One motivation for this analysis is that detecting so-called outlier values offers context for deciding if the risk of trend reversion is relatively high. Let’s add another metric to the tool-kit for this task: finding the value that marks the largest difference vs the average value over a trailing period.

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* NATO leaders fret over uncertain end-game for Ukraine war
* US spy chief says Putin is preparing for long conflict in Ukraine
* Fed officials consider why central bank acted slowly to tame inflation
* Household debt in US in Q1 posts largest single-quarter increase since 2006
* US gasoline prices reach record high price
* China consumer annual inflation rises to 5-month high in April: +2.1%
* China’s upcoming wheat harvest is concern for global food prices
* Are oil stocks the new FAANGs?
* UST, a ‘stablecoin’ designed to maintain a $1 peg, plunges
* US small business sentiment in April remains well below long-term average:

There’s no place to hide within the US equities risk factor spectrum, at least in absolute terms. But value stocks continue to shine on a relative basis via light losses this year. Will it last? More importantly, can value stocks regain their mojo and at some point outperform the growth factor with higher gains for an extended period? Or is the historical value premium destined to fade into a perpetual underperforming risk premium?

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