The future’s still uncertain,
but for the moment it’s been a good year so far.

All the best for 2016!

The last major economic release for the US in 2015 delivered a cautionary message. Initial jobless claims jumped substantially more than expected, rising to a seasonally adjusted 287,000 for the week through Dec. 26—the highest since July, the Labor Department reports. Claims are still low by historical standards and falling on a year-over-year basis. But putting the latest update into context with recent history hints at the possibility that this leading indicator–after a long and generally consistent decline over the last several years–has run its course in terms of probing ever lower (i.e., bullish) levels. That doesn’t mean that the labor market’s outlook has suddenly switched from positive to negative. Nonetheless, after more than six years of economic growth (in fits and starts), the cycle may be starting to show signs of aging.
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● US pending home sales in Nov fall for 3rd time in past 4 months | Reuters
● Puerto Rico Says It Will Default on Some Bonds | NY Times
● Key Events in 2016: The Year Ahead | Bloomberg
● 2016’s global wealth forecast | The Economist
● Oil market to ring in more gloom with 2016 | CNBC
● The States With the Hottest Housing Markets This Year | Fiscal Times

The 2-year Treasury yield surged yesterday (Dec. 29), rising to 1.09%–the highest since April 2010, based on daily data published by Treasury.gov. The increase in this key rate—considered to be the most-sensitive spot on the yield curve for rate expectations—suggests that the market’s confidence is rising that the Fed will continue to tighten monetary policy in 2016.
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● US consumer confidence rises more than expected in Dec | USA Today
● US home prices still rising at 5%-plus annual pace in Oct | NY Times
● US merchandise trade deficit shrinks in Nov | Bloomberg
● Johnson Redbook: US retail sales index up 2.1% in 3rd week of Dec | MNI
● State Street: global investor confidence rises in Dec | P&I
● Eurozone money supply growth slows in Nov; private lending improves | RTT
● Global growth will be disappointing in 2016 says IMF’s Lagarde | Reuters

In the previous installment in this series of analyzing a globally diversified portfolio we reviewed the results after adding a momentum-based risk-management system. The test suggested that a tactical overlay can be productive… maybe, depending on the details. Let’s continue to investigate our sample portfolio by taking a closer look at the underlying factors that are driving risk and return.
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● Dallas Fed mfg survey for Dec: activity gains; outlook slips | Bond Buyer
● Global stock fall as Chinese industry reels | Telegraph
● China Mfg PMI in Dec likely to show 5th month of contraction | Reuters
● Oil near 11-year lows on abundant supply, slowing demand | Reuters
● Significant pockets of weakness remain in US economy | Jared Bernstein
● The dirty little secret (data) in economics research | John Cochrane

US equities regained their bullish footing in the abbreviated trading week through Dec. 24, taking the lead among the major asset classes, based on a set of proxy ETFs. The Vanguard Total Stock Market ETF (VTI) posted a strong 2.8% total return for the four days through Christmas eve. In close pursuit: stocks in foreign developed-market nations via the Vanguard FTSE Developed Markets ETF (VEA).
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● US jobless claims fall, near lowest level in decades | MarketWatch
● US Consumer Comfort Index rises, close to 2-mo high | Bloomberg
● Economy not ‘normal’ despite steady progress in 2015 | MarketWatch
● Don’t Fear Interest Rates in 2016 | Barron’s
● Deutsche Bank sees higher bond-market volatility ahead | Bloomberg
● Oil falls towards $37, near 11-year low, as excess supply weighs | Reuters

So many fascinating books, so little time. Here’s the second installment of The Capital Spectator’s 2015 year-end review, which recaps some of the memorable titles that have appeared in the weekly Book Bits column this year. For those who missed it, here’s Part I. We’ll wrap up our retrospective next week with Part III.
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