Building “optimal” portfolios—maximizing return and minimizing risk–is a foundational concept in quantitative finance. Unfortunately, it’s not terribly practical. The problem, as many researchers have demonstrated over the years, is the elusive aspect of developing reliable estimates of return and risk. Mere mortals are notoriously ill-suited for such things. But crunching the numbers and identifying theoretically optimal strategies is still useful as a benchmark for thinking about how to design and manage your real-world asset allocation and framing history in a productive way.
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● Greece votes no. Now what?
● For starters, the finance minister resigned…
● French Finance Minister says Greece must now make the first move…
● In any case, Greece will have tough time remaining in the euro…
● Meanwhile, eurozone investor confidence rises…
● And European economic sentiment remains stable…
● But China’s stock market slump adds another risky dimension to summer outlook.

Happy 4th of July! In honor of Uncle Sam’s birthday, The Capital Spectator will refrain from discussions of finance, economics, and otherwise engaging in analytical acrobatics… until the long holiday weekend in the US comes to a close. The standard routine commences anew on Monday, July 6. To paraphrase (and slightly modify) an observation by Thomas Jefferson in a letter to James Madison a few centuries ago, a little rebellion relaxation now and then is a good thing.

● US payrolls post a solid increase in June but wages are flat…
● US jobless claims jumped more than expected last week…
● And US factory orders slumped in May…
● The US consumer comfort index rose last week to its highest level since April…
● Eurozone Composite PMI increased to a 4-year high last month…
● While China’s services sector expands at slowest rate in over a year in June…
● Meanwhile, Europe braces for Greece’s referendum on Sunday on a bailout packaged that expired on Tuesday. Regardless, polling shows the public is evenly split.

Private-sector payrolls rose 223,000 in June, a touch less than expected, based on Econoday.com’s consensus forecast. That’s a respectable gain, but it’s well below the previous month’s 250,000 advance, which was revised lower in today’s release. On its face, the latest results continue to paint an upbeat profile, but the numbers come with caveats, including the mild but ongoing deceleration in the year-over-year increase.
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● US private-sector job growth accelerated in June via ADP’s estimate…
● As US factory activity rose to a 5-month high in June…
● US construction spending reached a post-recession high in May…
● While mortgage applications in the US fell 4.7% last week…
● Global manufacturing growth eased closer to a 2-year low in June…
● And the Greek crisis lingers as uncertainty and confusion reign supreme with no resolution in sight.

Private nonfarm payrolls in the US are projected to increase by 211,000 (seasonally adjusted) in tomorrow’s update for June from the Labor Department, based on The Capital Spectator’s average point forecast for several econometric estimates. The prediction reflects a substantially lesser gain vs. the 262,000 advance in May.
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The markets staggered to the year’s midpoint with a thud, with most of the major asset classes suffering losses in June. The exception: broadly defined commodities (Bloomberg Commodity Index), which posted a modest 1.7% gain last month. The rest of the field was either flat or (in most cases) in the red. The big loser: US real estate investment trusts (REITs), which shed a hefty 4.6% in June, based on the MSCI REIT Index, leaving this measure of securitized real estate off by more than 6% so far in 2015.
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● Greece in default as eurozone set to discuss new bailout proposal…
● US consumer confidence rises in June, beats forecasts…
● US S&P/Case Shiller Home Price Index annual pace eases to 4.2% gain in April…
● PMI: Initial estimate of euro area manufacturing growth in June confirmed…
● As China’s manufacturing activity posts slight improvement in June.

The ISM Manufacturing Index is expected to tick fractionally lower to 52.7 in tomorrow’s update for June vs. the previous month, based on The Capital Spectator’s average point forecast for several econometric estimates. The prediction is still above the neutral 50.0 mark and so the current outlook still calls for moderate growth for this benchmark of economic activity in the US manufacturing sector.
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