The demand for safe-haven government bonds shows no sign of easing. It’s not hard to understand why when you consider renewed concern that the US economic recovery is cooling, US-China relations are deteriorating, and there are few signs that America is getting control of the coronavirus. It all adds up to a strengthening conviction that buying Treasuries, even at or near record low yields, remains a prudent choice.

Continue reading →

Senate Republicans and White House set to unveil new relief bill: Roll Call
Trump to send “a surge” of federal security forces to US cities: BBC
Should we expect an October surprise for a Covid-19 vaccine? Politico
China likely to retaliate in US decision to close China’s Houston consulate: CNBC
FBI: China harboring military-linked fugitive scientist in California: CNN
Another night of unrest in Portland as mayor stung by tear gas: Reuters
US unemployment claims remain elevated, suggesting recovery is cooling: WSJ
Better-than-expected corporate earnings support European stock prices: Reuters
US existing home sales surged 21% in June–biggest monthly rise on record: CNBC

Year-to-date gains still dominate the US fixed-income landscape for year-to-date results. Except for junk bonds, the rest of the American bond realm is enjoying a bull run in 2020 through yesterday’s close (July 21), based on a set of exchange-traded funds.

Continue reading →

Trump: Covid-19 crisis will probably ‘get worse before it gets better’: CNN
Trump administration may expand federal law enforcement in cities: Politico
US orders China to close its Houston diplomatic consolate: NY Times
Economic hit from Covid-19 will endure, even with vaccine, economist says: CNBC
Key dates re: expiring coronavirus support programs around the world: BBG
Economists support extension of paying jobless workers $600 a week: 538
Senate banking committee approves Shelton, Waller for Fed positions: CNBC
Japan Composite PMI for July still reflects deep economic contraction: IHS Markit
Chicago Fed Nat’l Activity Index (1mo) continues to indicate economic recovery: CF

Next week’s release of the initial second-quarter US GDP data is widely expected to be a horror show. Is relief on its way in Q3?

Continue reading →

Three vaccine developers report encouraging initial results: NY Times
US bars 11 Chinese firms from buying American technology products: NY Times
Trump may send more federal law enforcement officers to major US cities: BBC
UK ends extradition treaty with Hong Kong: CNN
European Union agrees on $859 billion coronavirus recession stimulus: BBC
Chevron will buy Noble Energy–biggest US energy deal since oil crash: CNBC
Turkey overtakes Russia as world’s top buyer of gold: Nikkei Asian Review
S&P 500 edged higher on Monday, closing above previous post-correction peak:

Equities outside the US in developed markets topped last week’s widespread gains for the major asset classes, based on a set of exchange-traded funds. Rising nearly 2% for the trading week through July 17, the rally in this corner lifted prices to a level that’s close to a post-correction high.

Continue reading →

Trump suggests he may not accept 2020 election results: CNBC
Trump administration seeks to phase out funding for coronavirus testing: ABC
Protein treatment trial called ‘a breakthrough’ for Covid-19: BBC
Controversial Fed nominee, Judy Shelton, faces Senate vote this week: NY Times
Economic recovery depends on success in fighting pandemic flare-ups: WSJ
Government spending expected to rise to support businesses, says analyst CNBC
Managers look for opportunity in battered landscape of small cap stocks: Reuters
Gold headed for new record high, Citigroup analysts predict: Bloomberg
Consumer sentiment in US retreated in July due to coronavirus worries: UoM
US housing construction continued to rebound in June: CNBC
5-Year Treasury TIPS real yield falls below -1% for first time since 2013:

● Underwater: How Our American Dream of Homeownership Became a Nightmare
Ryan Dezember
Review via The New York Times
It is certainly worth debating whether homeownership should be something every American strives for. But it’s not a change that should be imposed by companies that see profit in forcing this dramatic change on people who would otherwise be able to buy their own homes. As Dezember notes, “If homeownership falls out of fashion for even a generation, there could be dire economic consequences unless renters become diligent savers and prudent investors.” In other words, bring on the retirement crisis.

Continue reading →

The Smart Beta Mirage
Shiyang Huang (University of Hong Kong), et al.
June 2020
We document sharp performance deterioration of smart beta indexes after the corresponding smart beta ETFs are listed for investments. Adjusted by aggregate market return, the average return of smart beta indexes drops from 2.77% per year “on paper” before ETF listing to −0.44% per year after ETF listing. This performance deterioration cannot be explained by strategic timing in ETF listing nor explained by time trend in factor premia. We find evidence of data mining in constructing smart beta indexes as the post-ETF-listing performance decline is much sharper for indexes that are more susceptible to data mining in backtests. Our results caution the risk of data mining in the proliferation of ETF offerings as investors respond strongly to the stellar performance in backtests.
Continue reading →