The US economy expanded at the slowest rate in a year in February, according to this morning’s update of the Chicago Fed National Activity Index. The three-month moving average of this business cycle benchmark (CFNAI-MA3) decelerated to -0.08 last month vs. +0.26 in January. Last month’s pace is the slowest reading since Feb. 2014 for the CFNAI-MA3 data. As a result, the US economic trend slipped to a slightly below-trend pace for the first time in 12 months.
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The US economy is on track to expand by 2.1% in this year’s first quarter, based on The Capital Spectator’s new median point forecast for several econometric estimates (real seasonally adjusted annual rate). The projection is incrementally below GDP’s 2.2% rise during 2014’s fourth-quarter.
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● US multinationals set to face much more pain from strong dollar | Reuters
● Bullard: Fed Policy Aimed At Economy, Not Forex Rates – CNBC | MNI
● Fed: Q4 Household Debt Service Ratio near Record Low | Calculated Risk
● Greek and German leaders meet amid cash shortage fears | BBC
● In Greece, Syriza Struggles to Deliver Promises as Money Runs Out | NY Times
● OPEC won’t bear burden of propping up oil price: Saudi minister | Reuters

● Goals-Based Wealth Management: An Integrated and Practical Approach to Changing the Structure of Wealth Advisory Practices
By Jean L. P. Brunel
Summary via publisher (Wiley)
Goals-Based Wealth Management is a manual for protecting and growing client wealth in a way that changes both the services and profitability of the firm. Written by a 35-year veteran of international wealth education and analysis, this informative guide explains a new approach to wealth management that allows individuals to take on a more active role in the allocation of their assets. Coverage includes a detailed examination of the goals-based approach, including what works and what needs to be revisited, and a clear, understandable model that allows advisors to help individuals to navigate complex processes.
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The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decelerate to a +0.05 reading in the February update that’s scheduled for Monday (Mar. 23), based on The Capital Spectator’s median point forecast for several econometric estimates. The projection is moderately below the +0.33 reading for January, which reflected a strong above-average pace of economic growth for the US relative to the historical trend. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for February as a guide, CFNAI’s three-month average is expected to remain at a rate of growth that’s slightly above the historical trend.
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How Often Should You Take Tactical Asset Allocation Decisions?
Byeong-Je An, et al.
March 5, 2015
About once a quarter. We compute optimal tactical asset allocation (TAA) policies over equities and bonds when both asset returns are predictable. By varying how often the weights are reset, we estimate the benefits and costs of different frequencies of TAA decisions. Tactical tilts taking advantage of predictable stock returns generate approximately twice as much value as those market-timing bond returns.
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● Jobless claims up slightly last week | USA Today
● Continuing Jobless Claims Near a Low, and That May Not Be Good | WSJ
● U.S. Leading Economic Index Rises 0.2% In February, In Line With Estimates | RTT
● Consumer Comfort Little Changed as U.S. Buying Climate Weakens | Bloomberg
● Philly Fed manufacturing index falls to 13-month low in March | Investing.com
● US Q4 current account deficit largest since 2012 | Reuters

The Federal Reserve removed the word “patient” from its new policy statement yesterday, signaling that the central bank is inching closer to raising interest rates. But in an attempt to walk a thin line with managing expectations, Fed Chairwoman Yellen advised that “just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient.” The comment certainly resonates when considered with the Fed’s updated economic forecasts, which trimmed the 2015 projection for growth to a 2.3%-to-2.7% range for real GDP vs. the 2.6%-to-3.0% range cited for the December meeting.
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● Fed Drops Patient Stance, Opening Door to June Rate Increase | Bloomberg
● Fed opens door wider for rate hike but downgrades economic outlook | Reuters
● The Fed sounds slightly worried about the strong US dollar | Quartz
● Oil futures give up gains as oversupply fears resurface | MarketWatch
● Japan’s All Industries Activity Index 1.9% vs. 1.7% forecast | Investing.com
● Wage growth slows in Britain but unemployment falls | Guardian

February was a rough month in several corners of the US economy, but business cycle risk remains low overall when measured across a broad set of indicators on a trend basis. Yet a weak housing market and softer numbers for the manufacturing sector have raised worries that economic growth isn’t as strong as it appeared to be in previous months. Optimists argue that the recent slowdown is a temporary soft patch due to a harsh winter. That’s a plausible forecast, in part because the all-important labor market continued to post strong growth through February. As for the big picture, the overall macro trend still has a high degree of positive momentum, based on the current numbers.
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