The crowd was in a buying mood last week, with most of the world’s markets posting gains, based on a set of proxy ETFs for the major asset classes. The main exception: commodities overall, which slipped back into a familiar bearish pattern. Otherwise, the trading week through Apr. 1 dispensed returns far and wide.
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Initial Guidance | 4 April 2016
● US payrolls rise 215,000 in March as wages pick up | Bloomberg
● US ISM mfg index in March points to first expansion in 6 months | MarketWatch
● US Consumer Sentiment Slips in March to 5-Month Low | AP
● PMI: Slow global mfg growth ticked up in March | Markit
● Trump’s prediction of ‘massive recession’ puzzles economists | Reuters
● What are the chances of a recession? Not what you’d think | Barry Ritholtz
Book Bits | 2 April 2016
● Fed Power: How Finance Wins
By Lawrence Jacobs and Desmond King
Summary via publisher (Oxford University Press)
The Federal Reserve is the most powerful central bank in the world. Without its central bank, America would be subject to devastating fluctuations in currency value and chronic economic instability. To stabilize the economy, the Fed adjusts interest rates and intervenes in the economy more directly when appropriate. According to most Fed observers, it as an impartial referee exercising its independence free from political interference in order to advance the best interests of America. Its actions during the Great Recession were heroic, saving the American and indeed the world economy from a far worse fate.
Wrong.
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US Private Payrolls Rise At Strongest Annual Pace In 5 Months
Private payrolls in the US increased 195,000 in March (seasonally adjusted), a moderately lower gain vs. February’s 236,000 advance, according to this morning’s update from the Labor Department. But the year-over-year trend improved, pointing to sustainable and healthy growth for the labor market in the near term.
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Major Asset Classes | March 2016 | Performance Review
Global markets snapped back sharply in March, posting the first run of across-the-board monthly gains for the major asset classes in nearly two years. Leading the markets higher: emerging market stocks (MSCI EM), which surged more than 13% last month—the biggest monthly advance in years for the index. Even the persistent bear market in broadly defined commodities had a reprieve in March—the Bloomberg Commodity Index gained nearly 4%.
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Initial Guidance | 1 April 2016
● US Jobless Claims Rose Last Week to 2-Month High | Bloomberg
● Job cuts down in Mar–2nd monthly decline | Challenger Gray
● US Consumer Comfort Index fell to 3mo low last week | Bloomberg
● Fed’s Dudley: US Economy In a ‘Good Place’ | MNI
● US employment gains seen strong, but wages tepid | Reuters
● China’s mfg activity unexpectedly expanded in March | Reuters
The Dynamic Duo Of Risk Factors: Part II
Last week’s post on analyzing US equity value and momentum risk premia ended with a question: How much, if any, improvement should we expect by adding a dynamic system for managing exposure to these risk factors vs. a buy-and-hold strategy? What follows is a preliminary effort in searching for an answer. As a preview, the results are mixed, but this may be an artifact of a) focusing on value and momentum factors within the US equity space; b) using a specific definition of value and momentum (via Professor Ken French’s data library), which merely scratches the surface for modeling possibilities; and c) applying a simple tactical model that may be responsive to parameter changes for enhancing results.
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Initial Guidance | 31 March 2016
● ADP reports 200,000 US private-sector jobs added in Mar | MarketWatch
● US mortgage apps fall 1%, dragged down by fewer refinances | CNBC
● US Hiring Remains Lively in March | MNI
● OECD Lowers Its Forecast for Global Growth This Year | NY Times
● The Stock Market Doesn’t Believe Janet Yellen | Fortune
ADP: US Private Payrolls Rise By A Respectable 200,000 In March
US companies added 200,000 jobs last month (seasonally adjusted), according to this morning’s update of the ADP Employment Report. Although March’s gain was slightly below the previous month’s increase, today’s release suggests that the year-over-year trend for private-sector job creation is settling in to a low-2% trend–a pace that’s strong enough, if sustained, to keep the US recovery on track.
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US Financial-System Risk Eases After Reaching 4-Year High
Financial stress in the US economy has ticked lower in recent weeks after jumping to a four-year high in February. The Cleveland Fed’s multi-factor benchmark is still elevated by historical standards, but this daily measure of distress in the financial system has fallen moderately through most of this month to date. Risk levels have also pulled back in March via two other financial stress indexes published by regional Fed banks.
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