It’s a tempting idea, and one that’s been bubbling for some time. The recent outperformance of tech stocks relative to the broad equity market has helped fuel the notion that this sector deserves to be treated differently.
Macro Briefing: 3 February 2021
* Senate Dems may pass Biden’s relief package without GOP support
* Today’s ADP estimate of US payrolls for Jan expected to post slight gain
* Jeff Bezos will step down as Amazon CEO
* Eurozone consumer inflation rebounded much more than expected in January
* Europe’s economy continued to contract in January amid weak services sector
* China’s services sector growth slowed in January amid coronavirus resurgence
* US crude oil (West Texas Intermediate) rises to nearly $55 a barrel, a 1-year high:
Risk Premia Forecasts: Major Asset Classes | 2 February 2021
The expected risk premium for the Global Market Index (GMI) continues to hold in the mid-5% range. In today’s revision, the long-run projection ticked down to 5.4% for January, slightly below the previous month’s 5.5% estimate. The forecast is a long-term outlook for this multi-asset-class index’s performance over the “risk-free” rate via a risk-based model (details below).
Macro Briefing: 2 February 2021
* GOP pushes Biden to embrace smaller relief bill
* China’s top diplomat warns US not to cross ‘red line’ on human rights issues
* Mynamar coup complicates Biden’s Asia strategy
* CBO projects that US economic expansion will continue in 2021
* US construction spending rose for a third month in December
* Eurozone economy contracted 0.7% in final quarter of 2020
* US Manufacturing PMI reaches record high in January
* US ISM Manufacturing Index: sector growth slowed in January:
Major Asset Classes | January 2021 | Performance Review
Stocks in emerging markets continued to lead the major asset classes in January as the top monthly performer.
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Macro Briefing: 1 February 2021
* Biden invites Republican senators to White House for relief talks
* Myanmar’s military seizes power and detains civilian leader Aung San Suu Kyi
* Russia arrests thousands amid protests over jailed opposition leader Navalny
* Reddit investor mania turns to precious metals
* China’s economy expected to overtake US earlier than previously forecast
* China manufacturing growth slowed, sliding to 7-month low in Jan
* Eurozone manufacturing growth remained “resilient” in January
* UK manufacturing growth slowed to 3-month low in January
* US Consumer Sentiment Index stabilized in January via slight decline
* Chicago region factory activity continued rising at strong pace in January
* How might US cryptocurrency regulation change with the Biden administration?
* US pending home sales fell in December–fourth straight monthly decline
* US consumer spending fell for a second month in December:
Book Bits: 30 January 2021
● The Inflation Myth and the Wonderful World of Deflation
Mark Mobius
Summary via publisher (Wiley)
The Inflation Myth and the Wonderful World of Deflation illustrates our rapidly changing world where constant technological innovation leads to cheaper and better products. These changes are no longer reflected in the ways we measure inflation. Renowned investor and author Mark Mobius persuasively argues that what we believe to know about inflation today does not reflect the reality any longer. It is a myth, a legend, a fable, and, yes, a falsehood for a number of reasons.
● The ETF Portfolio Strategist: 29 Jan 2021
In this issue:
- Risk-off returns to global markets
- No place to hide in the strategy benchmarks this week
- Managed-risk strategies suffered too
A rough way to end January: Markets around the world took it on the chin this week. Commodities and Treasuries managed to edge higher, but otherwise it was red ink across the board for our ETF proxies representing the major asset classes.
New Research Tries To Solve For Beta Risk’s “Failure” For Stocks
At the core of modern finance is the proposition that beta (market) risk is the dominant factor that drives performance. But numerous empirical tests of the capital asset pricing model (CAPM) over the decades suggest otherwise. There have be various attempts to adjust CAPM to find a closer mapping of risk and return, but the results have been mixed. Perhaps two new research papers move us closer to the elusive goal of revising a CAPM-based view of asset pricing so that its theoretical ideal for risk and return moves closer to empirical results in money management practice.
Macro Briefing: 29 January 2021
* Democrats plan to ‘act big’ on Covid-19 rescue plan, with or without GOP
* Novax vaccine is 90% effective, but far less so against Covid-19 variants
* US consumer income likely rose and spending fell in today’s December report
* Is a new currency war brewing for Treasury Sec. Janet Yellen?
* General Motors plans to sell only zero-emission cars by 2035
* US economy rose 4.0% (annualized) in Q4, modestly slower than expected
* US Leading Economic Index rose in December, but at slower pace vs. November
* German economy eked out a tiny gain in last year’s fourth quarter
* New US home sales rose in December–first increase since July
* Trade deficit for US narrowed in December
* US jobless claims up less than expected but remain unusually high:
