● 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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● Is Janet Yellen committed to a summer interest rate hike? | Fortune
● US housing starts see biggest collapse since January 2007 | HousingWire
● Redbook: US retail sales rise in first half of March | MNI
● ZEW: German investor morale at brightest in just over a year | Reuters
● Japan’s Central Bank Warns of Temporary Return to Deflation | NY Times

New construction of US residential housing in February was considerably weaker than expected, raising more doubts about the resilience of the economy’s strength. Analysts were looking for a mild pullback to a seasonally adjusted annual rate of 1.048 million units for last month. As it turns out, that was far too optimistic. The Census Bureau reports that housing starts slumped 17% last month to an annual pace of 897,000, the lowest in more than a year. Is the weakness a danger sign for the macro trend? Or is it just a blip due to a rough winter that’s temporarily weighing on economic activity? No one really knows at this stage, although that doesn’t stop anyone from choosing a narrative that fits their economic worldview.
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The Federal Reserve’s two-day meeting begins today, ending with tomorrow’s announcement that will be widely analyzed for signals on the expected timing of the first interest rate hike since 2006. Some analysts have recently predicted the first hike could come as early as June, but the wobbly economic data of late suggests that the Fed may be inclined to delay the start of a tighter monetary policy. The market once again seems to be embracing the lower-for-longer view, based on the latest run into bonds. After Treasury yields reached 2015 highs earlier this month, rates have pulled back in recent days ahead of tomorrow’s Fed announcement.
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● Weak US factory data suggest softer economic growth | Reuters
● US Homebuilder Confidence Drops To Eight-Month Low In March | RTT
● Timing of Fed Rate Move Remains Clouded | WSJ
● Empire State Manufacturing Activity Growth Unexpectedly Slows in Mar | Fox
● US oil prices under pressure after hitting six-year low | MarketWatch

Housing starts are expected to increase marginally to an annual pace of 1.069 million units in tomorrow’s update for February, according to The Capital Spectator’s median point forecast for several econometric estimates. The projection represents an incrementally higher level of residential construction vs. January’s data.
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Output in the industrial sector increased at a slower rate than expected last month—0.1% vs. the 0.3% gain projected in Econoday.com’s consensus forecast. A darker picture emerges when we focus on the manufacturing component, which represents the lion’s share of industrial activity. So-called factory output slumped 0.2% last month, the third consecutive monthly decline, the Federal Reserve reports.
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In the previous post on using R for portfolio analysis and design, we discovered that global diversification across asset classes has been modestly beneficial relative to a basic 60%/40% US stock/bond allocation. The global aspect didn’t add a lot of value because US equities during the sample period—from 2004 onward—generally delivered strong results, particularly over the last five years. But the future may not be so kind to a US-centric portfolio and so it’s reasonable to wonder if global diversification may be more productive in the years ahead. On that note, if we’re holding an international portfolio across asset classes, what are the possibilities for managing risk with a more aggressive process vs. a simple rebalancing program? As one possibility, let’s consider how a momentum-factor model compares vs. the basic rebalancing strategy. As a preview, this backtest looks quite encouraging for keeping drawdowns to a minimum while capturing the bulk of the upside returns via staying fully invested in the asset mix.
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● Low wages, high dollar test Fed’s patience | Global Post
● US business confidence drops to post-crisis low in February | Markit
● Global recovery fragile, India a bright spot: IMF’s Lagarde | Reuters
● Global business confidence, hiring intentions slip to post-crisis low | Markit
● Chinese business optimism strengthens to 1-year high | Markit
● German business sentiment improves markedly | Markit
● Swiss Producer & Import Prices Fall Most Since Late 2009 | RTT