The surprisingly sharp drop in yesterday’s release of the ISM Non-Manufacturing Index for August has unleashed new worries that the US economy is weakening as it heads into the final months of 2016. It doesn’t help that the Federal Reserve’s broadly defined Labor Market Conditions Index (LMCI) dipped back into negative territory last month. Neither of these soft numbers present a smoking gun for arguing that the US is slipping into a new recession, but the news raises more doubts about the wisdom of raising interest rates at the Fed’s monetary policy meeting that’s scheduled for Sep. 20-21.
Continue reading →

Hawkish commentary from Fed officials in recent weeks has fueled speculation that the central bank may be poised to raise rates for a second time. Maybe so, but the newly retired governor of India’s central bank warns that the low- and negative-interest-rate regimen that’s become a staple in monetary policies around the world since 2008 won’t be easily reversed. “Often when monetary policy is really easy, it becomes the residual policy of choice,” Raghuram Rajan tells The New York Times.
Continue reading →

Emerging-market equities regained the lead last week in the horse race among the major asset classes, based on a set of proxy ETFs. This slice of global stocks has posted weekly gains in seven of the last eight weeks. Meanwhile, broadly defined commodities led the field lower last week, as negative momentum continues to weigh on prices for raw materials.
Continue reading →

● Progress: Ten Reasons to Look Forward to the Future
By Johan Norberg
Review via The Economist
Humans are a gloomy species. Some 71% of Britons think the world is getting worse; only 5% think it is improving. Asked whether global poverty had fallen by half, doubled or remained the same in the past 20 years, only 5% of Americans answered correctly that it had fallen by half. This is not simple ignorance, observes Johan Norberg, a Swedish economic historian and the author of a new book called “Progress”. By guessing randomly, a chimpanzee would pick the right answer (out of three choices) far more often.
Continue reading →

US job growth slowed in August, the Labor Dept. reports, although the year-over-year growth rate remained unchanged at 1.90%. Economists projected that the US companies would add 179,000 jobs last month—the actual increase was considerably lower at 126,000.
Continue reading →

Correction: The table below with expected vs. trailing risk premia was originally posted without the line of data for Foreign REITs/Real Estate. The oversight has been corrected and a revised version of the table that includes all data is now available. Apologies.
–JP
The Global Market Index’s expected risk premium ticked lower in August after rising to a 14-month high in the previous month. GMI—an unmanaged market-value weighted mix of the major asset classes—is expected to earn an annualized 3.6% risk premium over the long term, modestly below last month’s estimate. (For details on the equilibrium-based methodology that’s used to generate the forecasts each month, see the summary below.)
Continue reading →

Inflation-linked bonds issued by foreign governments came alive in August, posting the strongest performance among the major asset classes. Last month’s hefty 3.6% total return for the Citi World Inflation-Linked Bond ex-US Index suggests a whiff of worry in the global markets on the subject of future pricing pressure for the global economy. Misguided? Perhaps, given that disinflation and negative interest rates are still casting a shadow across several key regions around the world.
Continue reading →

US private-sector payrolls increased by a moderate 177,000 in August, according to the ADP Employment Report. Although the increase is below July’s upwardly revised increase of 194,000, the expansion is strong enough to support the view that the US economy is still on track to post stronger growth in the third quarter and repair some of the damage from the weakness in this year’s first half.
Continue reading →

Consumer confidence bounced to its highest level in nearly a year, according to yesterday’s update from the Conference Board. Boosted by optimism on the outlook for the labor market, the index follows news on Monday that year-over-year private-sector wage growth in July strengthened for the second month in a row, rising 4.3%–the fastest annual pace since January.
Continue reading →

Yesterday’s upbeat report on consumer spending and income in the US provides fresh support for last week’s moderately hawkish comments from Fed officials, who hinted that another interest-rate hike is near, perhaps as early as next month’s Federal Open Market Committee (FOMC) meeting. Yet support for pricing in a new round of policy tightening is modest at best via Treasury yields. Is that because job growth is expected to slow in this Friday’s employment report for July after two months of strong increases?
Continue reading →