The US stock market may be on the verge of decisively throwing off its bear-market shackles and making fools of analysts (including yours truly) who’ve been issuing cautious commentary in recent months. It’s also been clear for more than a month that a previously issued markets-based warning on US business-cycle risk has been wrong, at least so far. As yesterday’s broad-minded review of economic indicators relates, the US economy wasn’t in recession in March, based on data published to date. In the wake of the equity market’s rally in recent weeks, the call that stocks were at risk of a bear market may be about to fade too.
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● US home sales rebound signals strong spring selling season | Reuters
● US mortgage applications: refi gains offset by purchase losses | HousingWire
● Global Stocks Rally With Commodities | Bloomberg
● Stock market gives little sign this bull run will stop soon | MarketWatch
● When Discredited Policies Make Sense | Narayana Kocherlakota via Bloomberg
● Draghi to mount defence of ECB in face of German criticism | Reuters

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to tick higher in tomorrow’s March update, based on The Capital Spectator’s average point forecast for several econometric estimates. The average projection for -0.02 reflects a slight improvement over the previous month. The forecast for March anticipates that US economic activity is running slightly below the historical trend rate of growth.
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Recent economic updates reveal that US growth has slowed in the first quarter, but the deceleration wasn’t sharp enough to trigger a recession, based on a broad set of numbers published through March. Estimates for first-quarter GDP suggest otherwise, but the evidence is still weak for arguing that a new downturn started last month when reviewing the data across multiple indicators from a bottom-up perspective.
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There’s no chance that the Federal Reserve will announce a rate hike at its monetary meeting next week, according to the Fed funds futures market. The implied probability that the central bank will lift the current 0.25%-to-0.50% range at the Apr. 27 FOMC confab is effectively nil via CME data (as of Apr. 19). It’s another story, however, when we look at the year-over-year change in the real (inflation-adjusted) monetary base (M0). By this measure, the central bank’s shift to a policy tightening stance continued in March.
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● US housing data adds to signs of weak Q1 GDP growth | Reuters
● GDPnow estimate for US growth in Q1 unchanged at +0.3 | Atlanta Fed
● NY Fed nowcast of Q1 GDP growth for US: +0.8% | NY Fed
● Redbook: US retail sales +0.8% mtd vs. year-ago level | MNI
● US Economic Confidence Index Stable at -12 | Gallup
● Worldwide Oil Production Outages Bump Up Oil Prices | Oilprice.com

If the Federal Reserve needed another excuse to postpone a second interest-rate hike, today’s March report on residential housing construction fits the bill. Housing starts slumped last month, dealing a downside surprise to market expectations for a modest bump. The news follows last week’s disappointing data on retail spending and industrial activity at the end of the first quarter.
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Developing confidence about a portfolio strategy’s track record (or throwing it onto the garbage heap), whether it’s your own design or a third party’s model, is a tricky but essential chore. There’s no single solution, but a critical piece of the analysis for estimating return and risk, including the potential for drawdowns and fat tails, is generating synthetic performance histories with a process called bootstrapping. The idea is based on simulating returns by drawing on actual results to see thousands of alternative histories to consider how the future may unfold. The dirty little secret in this corner of Monte Carlo analysis is that there’s more than one way to execute bootstrapping tests. To cut to the chase, block bootstrapping is a superior methodology for asset pricing because it factors in the reality that marktet returns exhibit autocorrelation. The bias for momentum–positive and negative–in the short run, in other words, can’t be ignored, as it is in standard bootstrapping.
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● US homebuilder confidence holds steady in April | Bloomberg
● Dow above 18,000 for first time in 9 months | MarketWatch
● Boston Fed’s Rosengren: ‘Gradual’ rate increases ‘absolutely appropriate’ | MNI
● Americans Most Confident in Sanders, Kasich on Economy | Gallup
● Corporate defaults hit highest level since ’09 bust | USA Today
● Silver surges to 10-month high; lifts gold | Reuters

Housing starts are expected to total 1.160 million units (seasonally adjusted annual rate) in tomorrow’s March report, according to The Capital Spectator’s average point forecast of several econometric estimates. The projection represents a slight decline from the previous month’s level of residential construction activity.
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