AQR Capital Management’s Cliff Asness has launched a healthy discussion about the trials and tribulations of factor timing with a new essay (“The Siren Song of Factor Timing”). He’s recommends that investors steer clear, which is good advice because the crowd’s record, in the aggregate, to successfully engage in market-timing activities generally is overwhelmingly poor. But Asness isn’t an absolutist. Instead, he notes that sometimes the perceived opportunities for engaging in a bit of timing are just too compelling to pass up.
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● US mortgage applications up just 0.4%, despite rates near 3-yr lows | CNBC
● US Budget Deficit Expanded in April | WSJ
● UK’s looming ‘Brexit’ vote is causing global shivers | USA Today
● The Fed Made the Poor Poorer via tight policy | Narayana Kocherlakota (Bbg)
● Gold Fund Buying Frenzy Spurs Demand to 2nd-Highest Ever | Bloomberg
● Majority of Brazil’s Senate to vote for Rousseff impeachment | Reuters

Portfolio design comes in many flavors, but so do investors. Finding a sensible balance is job one in the pursuit of prudent financial advice. Yet for some folks the idea of keeping an open mind for customizing strategy to match an investor’s goals, risk tolerance and other factors reeks of treachery. There can only be one solution for everyone—all else is deceit. Or so some would have you believe. This biased worldview comes up a lot with the discussion of buy and hold, but the one-size-fits-all argument knows no bounds.
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● US job openings hit eight-month high in March | Reuters
● US small-business sentiment rises in Apr, halts 3-mo slide | MarketWatch
● US wholesale inventories barely rises in Mar, sales rebound | Reuters
● Redbook: US retail sales +2.5% YoY in 1st week of May | TradingEconomics
● GDPNow forecast for US GDP growth revised up to +2.2% | Atlanta Fed

Yesterday’s April update of the Federal Reserve’s Labor Market Conditions Index (LMCI) points to a sluggish rebound for the US economy in the second quarter after flirting with stall-speed GDP growth in Q1. Although LMCI ticked up last month, this multi-factor benchmark posted its fourth consecutive negative reading—the longest stretch of below-zero values since the last recession. That’s not encouraging, but for the moment the main risk is slow growth rather than a new downturn that triggers an NBER-defined slide into recession.
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● Fed’s Labor Market Conditions Index for April Stays Negative | St Louis Fed
● US Employment Trend Index: lower growth expected | Conference Board
● US Workers Regain Faith in Finding Good Job if Laid Off | Gallup
● Japan Q1 GDP Seen Showing Flat Growth After Q4 Slump | MNI
● Are business cycles random events? | Marginal Revolution
● Hedge Funds Faced Choppy Waters in 2015, but Chiefs Cashed In | NY Times
● China’s Consumer Inflation Continued Firming Trend in Apr | Bloomberg

Markets delivered widely divergent performance results last week, based on a set of proxy ETFs. US real estate investment trusts (VNQ) surged 4.6% for the five trading days through May 6, posting the strongest total return by far among the major asset classes. Meanwhile, emerging market stocks (VWO)–the worst performer–tumbled a hefty 4.2% last week in total return terms.
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● US economy adds fewest number of jobs in 7 months in Apr | USA Today
● Wall St gives up on June rate hike after soft jobs report | Reuters
● Market is skeptical of US 2% inflation target | Econobrowser
● China stocks plunge as hopes for economic recovery fade | Reuters
● Global economic growth remains weak at start of Q2 | Markit
● German Factory Orders Recover In March | RTT

● Success and Luck: Good Fortune and the Myth of Meritocracy
By Robert H. Frank
Summary via publisher (Princeton University Press)
How important is luck in economic success? No question more reliably divides conservatives from liberals. As conservatives correctly observe, people who amass great fortunes are almost always talented and hardworking. But liberals are also correct to note that countless others have those same qualities yet never earn much. In recent years, social scientists have discovered that chance plays a much larger role in important life outcomes than most people imagine. In Success and Luck, bestselling author and New York Times economics columnist Robert Frank explores the surprising implications of those findings to show why the rich underestimate the importance of luck in success—and why that hurts everyone, even the wealthy.
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Company payrolls increased by a lower-than-expected 171,000 last month, the US Labor Department reports–the weakest gain in three months. The crowd had been looking for stronger results near +200,000. Instead, this morning’s update falls in line with ADP’s April profile of weaker growth.
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