The August update shows a moderate increase in the long-run expected risk premium for the Global Market Index (GMI), an unmanaged, market-value weighted mix of all the major asset classes. GMI is projected to earn an annualized 4.7% return over the “risk-free” rate. That’s up from last month’s 3.9% estimate.
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Private nonfarm payrolls in the US are projected to rise 223,000 (seasonally adjusted) in tomorrow’s August update of the ADP Employment Report, based on The Capital Spectator’s median econometric point forecast. The expected gain is slightly higher than the previously reported increase for July.
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Most markets around the globe bounced back in August after July’s drubbing. Although there’s still plenty of risk percolating around the world, there were few signs that investors were becoming cautious last month.
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The ISM Manufacturing Index is expected to decline slightly to 56.8 in tomorrow’s update for August vs. the previous month, based on The Capital Spectator’s median econometric point forecast. The estimate is still well above the neutral 50.0 mark and so the current outlook remains firmly in growth territory.
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The long Labor Day weekend in the US is fast approaching and that means one thing at the world headquarters of The Capital Spectator: a 120-hour coffee break has commenced for all employees. The usual schedule resumes next week, on Tuesday, September 2, when the staff punches the digital time clock once again. Meanwhile, to working stiffs everywhere… Cheers!

Tomorrow’s update on US personal consumption spending for July is expected to show a rise of 0.3% vs. the previous month, based on The Capital Spectator’s median econometric point forecast. That’s a slight deceleration in growth vs. June’s 0.4% increase.
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Morningstar got a lot of pushback from readers in the wake of John Rekenthaler’s recent essay that asked a loaded question: “Do Active Funds Have a Future?” His short answer: “Apparently not much.” Unsurprisingly, advocates of active management responded with gales of criticism, triggering a bit of a mea culpa from Rekenthaler, a Morningstar veteran and generally speaking one of the better analysts in the mutual fund game. He writes in a follow-up piece: “Rather than pit active funds against passive funds, I should distinguish between deserving funds and those that are not. I agree.”
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The S&P 500 briefly traded above 2000 yesterday for the first time. The all-time high inspired some analysts to announce (not necessarily for the first time) that the stock market was in bubble territory. But there’s a reason for the bull market: economic growth. We can debate if the growth is sustainable or even genuine–some say it’s an artifact of central bank liquidity. But that’s a separate issue. Growth is still growth, and the market’s reacting to current conditions accordingly.
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The surprisingly strong rebound in second-quarter GDP growth will suffer a substantial bout of deceleration in the third quarter, according to the Capital Spectator’s median econometric nowcast. The US economy is projected to increase 2.5% (real seasonally adjusted annual rate) in the July-through-September period, down from the 4.0% rate reported by the Bureau of Economic Analysis (BEA) for Q2.
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● Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations
By Tobias E. Carlisle
Summary via publisher, Wiley
Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations is a must-read exploration of deep value investment strategy, describing the evolution of the theories of valuation and shareholder activism from Graham to Icahn and beyond. The book combines engaging anecdotes with industry research to illustrate the principles and methods of this complex strategy, and explains the reasoning behind seemingly incomprehensible activist maneuvers. Written by an active value investor, Deep Value provides an insider’s perspective on shareholder activist strategies in a format accessible to both professional investors and laypeople. The Deep Value investment philosophy as described by Graham initially identified targets by their discount to liquidation value. This approach was extremely effective, but those opportunities are few and far between in the modern market, forcing activists to adapt.
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