Private nonfarm payrolls in the US are projected to increase by 213,000 (seasonally adjusted) in tomorrow’s February update of the ADP Employment Report, based on The Capital Spectator’s median point forecast for several econometric estimates. The median projection matches January’s increase.
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The expected risk premium for the Global Market Index (GMI) increased in the February estimate — the first rise in six months. GMI — an unmanaged, market-value weighted mix of the major asset classes — is projected to earn an annualized 4.0% over the “risk-free” rate for the long term. (For details on the equilibrium-based methodology that’s used to generate the forecasts each month, see the summary below). Today’s updated estimate, which is based on data through the close of last month, jumped 50 basis points from the previous 3.5% projection.
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● Weak US consumer spending points to slower first-quarter growth | Reuters
● German retail sales surge at fastest pace in seven years | Reuters
● U.S. Manufacturing Growth Is Slowest In 13 Months | RTT
● US construction spending falls 1.1 percent in January | Fox
● Steady growth of global manufacturing continues in February | Markit

February witnessed a bit of mean reversion among the major asset classes as the winners and losers at the extremes in recent history traded places last month. The bearish trend in commodities (Bloomberg Commodity Index) eased as the asset class generated its first monthly gain since June 2014. Meanwhile, the high-flying real estate sector (real estate investment trusts) stumbled in February, marking the first case of red ink in five months. As a result, REITs (MSCI REIT Index) were dead last in February’s horse race, retreating by 3.6% on a total return basis. As for the top performer, the award goes to foreign equities in developed markets. The MSCI EAFE rallied sharply last month, advancing 6.0% in US dollar terms (unhedged). US equities were in close pursuit, climbing 5.8% via the Russell 3000 Index.
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● Dollar near 11-year high after Chinese rate cut, eyes on ECB | Reuters
● China’s factory output rise for 1st time in 4 months | Markit
● Eurozone Consumer Prices Fall Less Than Expected In February | RTT
● Eurozone jobless rate ticks down to 11.2% in January | Eurostat
● Eurozone manufacturing maintains modest growth in February | Markit
● Germany Manufacturing PMI signals modest improvement | Markit
● UK Factory Activity At 7-month High, Exceeds Forecast | RTT

Economists are projecting no change to a slight decline for tomorrow’s January update on personal consumption expenditures (PCE) vs. December. The consensus forecast via Econoday.com, for instance, is zero; Briefing.com’s survey of analysts expects a marginal loss. It all adds up to a good guess, based on last month’s release on retail sales, which slumped 0.8% in January. The positive spin is that headline spending is weak because of “falling gasoline sales in dollar terms,” as I discussed a few weeks ago, which is to say that the trend still looks encouraging after excluding spending at the pump—particularly on a year-over-year basis. That’s still my working assumption, in part because payrolls continue to rise at a robust pace. The main event for Monday will be deciding if the PCE data offers a different perspective.
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The ISM Manufacturing Index is expected to decline to 52.8 in tomorrow’s update (Mar. 2) for February vs. the previous month, based on The Capital Spectator’s median point forecast for several econometric estimates. The prediction is still above the neutral 50.0 mark and so the current outlook remains in moderate growth territory for this benchmark of economic activity in the US manufacturing sector.
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● Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies
By Meb Faber
Summary via Amazon
With all of our focus on assets – and how much and when to allocate them – are we missing the bigger picture? Our book begins by reviewing the historical performance record of popular assets like stocks, bonds, and cash. We look at the impact inflation has on our money. We then start to examine how diversification through combining assets, in this case a simple stock and bond mix, works to mitigate the extreme drawdowns of risky asset classes. But we go beyond a limited stock/bond portfolio to consider a more global allocation that also takes into account real assets. We track 13 assets and their returns since 1973, with particular attention to a number of well-known portfolios, like Ray Dalio’s All Weather portfolio, the Endowment portfolio, Warren Buffett’s suggestion, and others. And what we find is that, with a few notable exceptions, many of the allocations have similar exposures.
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Asset allocation is second to none in the hierarchy of critical investment decisions, but benchmarking and general analysis in this space can be a slippery affair. That’s no surprise, since portfolio design and management deserves to be customized for each investor. But while asset allocation is largely an insular project, keeping an eye on how these strategies are faring generally is a useful exercise in the cause of developing perspective. With that in mind, I’ll be checking in on a set of asset allocation funds from here on out as an excercise for monitoring and evaluating this critical corner of the money game. As such, it’s really an excuse to kick the tires on a mix of techniques for evaluating portfolios generally.
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● U.S. Durable Goods Orders Rebound 2.8% In January | RTT
● Jobless Claims in U.S. Jump by Most Since December 2013 | Bloomberg
● Consumer Prices Drop, Primarily Because of Falling Gas Prices | NY Times
● Dollar on track for eighth month of gains on U.S. data, Fed outlook | Reuters
● Eurozone macro index rises for 3rd month in February | RTT
● Japan economic data signal slow recovery despite lower oil prices | USN&WR