US economic growth remains sluggish, as last week’s disappointing Q2 GDP report shows, but you can’t blame the weak macro trend on consumers. Personal consumption expenditures continued to increase at a modest rate in June, rising 0.4% for the second month in a row, the Bureau of Economic Analysis reports. The gain pushed the annual pace up to 3.7%, close to the strongest year-over-year advance in nearly a year. There are any number of challenges weighing on the economy, but weak spending on Main Street isn’t one of them.
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The expected risk premium for the Global Market Index rebounded in July, rising to a 14-month high. GMI—an unmanaged market-value weighted mix of the major asset classes—is expected to earn an annualized 3.8% risk premium over the long term, moderately above last month’s estimate. (For details on the equilibrium-based methodology that’s used to generate the forecasts each month, see the summary below.)
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Foreign stocks led markets higher in July. Equities in developed markets ex-US (MSCI EAFE) topped the performance list with a 5.1% total return last month, edging out emerging-market stocks (MSCI Emerging Markets), which tacked on 5.0%. July’s third-strongest gain among the major assets classes was also outside the US: foreign property shares (S&P Global ex-US Property), which also popped 5.0% (effectively tied with emerging-market shares).
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● Invest in the Best: Applying the principles of Warren Buffett for long-term investing success
By Keith Ashworth-Lord
Summary via publisher (Harriman House)
This book concentrates on the investment style of Business Perspective Investing, as practiced by Benjamin Graham and Warren Buffett. It takes the reader through the realisation that the thought process involved when buying shares in a company is no different to buying the company in its entirety.
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The US stock market has been trading at or near record highs recently, a performance that inspires some analysts to predict that the long-running equity bull market is still poised for even greater heights. But viewed in context with the bond market, the relative return spread in favor of stocks is looking a bit tired. Is this a sign that the equity market’s recent surge is the last hurrah for the bulls? Maybe, but the relative-return edge for stocks could revive if fixed-income investing suffers because the 35-year slide in interest rates is finally poised to reverse in a meaningful degree.
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The question went viral this week after Paul Westra, an analyst at Stifel Financial Corp., raised the possibility in a research note. Bloomberg on Tuesday published a news story about the implied forecast, noting that the “this doesn’t just bode ill for restaurants, but could point to trouble across the economy as a whole.” The main takeaway, we’re told, is that the US could slide into a recession in early 2017. There’s only one problem: the possibilities for different macro scenarios between today and six months forward are close to infinite, thanks to the complexity of an $18 trillion economy and the constancy of an uncertain future.
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The Federal Reserve is expected to forgo a rate hike in today’s FOMC policy announcement and keep the target Fed funds at a 0.25%-to-0.50% range. But the recent increase in the effective Fed funds rate (EFF) suggests that a hawkish bias is bubbling.
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US economic growth is on track to post an encouraging rebound in this Friday’s “advance” GDP report for the second quarter. By most estimates, the Bureau of Economic Analysis is expected to report that output will rise by 2%-plus in Q2, well above the subdued 1.1% rise in Q1 GDP (seasonally adjusted annual rates).
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Summertime sizzle was on full display last week for US real estate investment trusts (REITs). These securities delivered the strongest gains for the five trading days through July 22, based on set of ETF proxies for the major asset classes. US REITs also continue to hold the top spot for the trailing one-year period.
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● Overcomplicated: Technology at the Limits of Comprehension
By Samuel Arbesman
Review via Publishers Weekly
Arbesman (The Half-Life of Facts), a self-described “complexity scientist,” presents a new framework for understanding and working with complex technological systems in this thought-provoking treatise. Arbesman argues that technological systems have become so complicated that not even those who design them fully understand how they work, nor do they always know what to do when their systems fail or return unexpected, possibly catastrophic results. He illustrates this through numerous examples of flaws or breaks in increasingly sophisticated systems such as traffic control, the stock market, machine translation, and medical devices.
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