May was quite ugly for the capital markets around the globe. We haven’t seen anything like this in a while. The last time a single calendar month pinched so many asset classes so deeply: September 2011. Last month delivered a repeat performance, with prices sliding almost everywhere, in several cases by a lot. The one exception: US stocks. The Russell 3000 posted a healthy 2.4% total return last month, leaving US equities higher by a hefty 15.6% so far in 2013. But that’s where the good news ends.
Book Bits | 6.1.13
● Time No Longer: Americans After the American Century
By Patrick Smith
Summary via publisher, Yale University Press
Americans cherish their national myths, some of which predate the country’s founding. But the time for illusions, nostalgia, and grand ambition abroad has gone by, Patrick Smith observes in this original book. Americans are now faced with a choice between a mythical idea of themselves, their nation, and their global “mission,” on the one hand, and on the other an idea of America that is rooted in historical consciousness. To cling to old myths will ensure America’s decline, Smith warns. He demonstrates with deep historical insight why a fundamentally new perspective and self-image are essential if the United States is to find its place in the twenty-first century.
ISM Manufacturing Index: May 2013 Preview
The ISM Manufacturing Index is projected to decline to 50.1 (slightly above a neutral 50.0 reading) in Monday’s update for May, based on The Capital Spectator’s average econometric forecast. The estimate reflects a marginal decline from the previously reported 50.7 for April. The Capital Spectator’s average projection is moderately below a consensus forecast that’s based on a survey of economists.
April Was A Rough Month For Spending & Income
Consumer spending and disposable personal income declined last month, the US Bureau of Economic Analysis reports. That’s a worrisome sign because the annual rate of growth for both indicators has been trending lower for two years. The margin of comfort, in other words, is wearing thin, and today’s report doesn’t offer much in the way of encouraging signals for expecting a bullish change in the weather.
Checking In On Mr. Market’s Equity Asset Allocation
Several months ago I reviewed the relative market caps for stock markets around the world. It’s an academic exercise, but one that offers some useful perspective for designing portfolios and evaluating existing asset allocation strategies. As a benchmark, Mr. Market’s choices have obvious appeal. Indeed, if you’re overweight or underweight a given market, you have a good starting point for analyzing risk.
Personal Consumption Expenditures: April 2013 Preview
Tomorrow’s update on personal consumption spending in April is projected to report a rise of 0.2% vs. the previous month, based on The Capital Spectator’s average econometric forecast. That matches the previously released 0.2% increase for March. The Capital Spectator’s average forecast is at the high end of consensus predictions drawn from surveys of economists.
Jobless Claims Increased Last Week, But The Broad Trend Is Still Positive
The good news for jobless claims in today’s weekly update is that there’s no news. Although new filings for unemployment benefits moderately increased by 10,000 to a seasonally adjusted 354,000 last week, that’s close to a wash in terms of one data point for this volatile series. The key issue is that claims continue to hover just above the five-year low of 327,000 for the week through April 27, 2013. That’s an encouraging sign as it suggests that the May payrolls report (scheduled for release next Friday, June 7) will deliver another round of moderate growth.
Macro-Markets Risk Index | 5.29.2013
A markets-based profile of US economic conditions suggests that business cycle risk remains low. The Macro-Markets Risk Index (MMRI) closed yesterday (May 28) at 15.6%–well above the danger zone of 0% and within the roughly 10%-to-17% range that’s prevailed so far in 2013. When MMRI falls under 0%, recession risk is elevated; readings above 0% equate with economic growth.
A Virtuous Cycle For Housing Prices & Consumer Confidence?
The business cycle bears took another hit yesterday. Home prices rose at a 10.9% annual pace in the March update of the 20-city composite of the S&P/Case-Shiller Home Price Index. That’s the fastest rate of increase in seven years. Meanwhile, consumer confidence rose to a five-year high this month, the Conference Board reports. Two data points alone are suspect, but looking at yesterday’s numbers in context with a broader review of economic and financial indicators suggests once again that the economy will continue to expand at a modest rate for the foreseeable future.
Q2:2013 US GDP Nowcast | 5.28.2013
Second-quarter US GDP is expected to increase 2.3% (real seasonally adjusted annual rate), according to The Capital Spectator’s average econometric nowcast. Today’s projection is down from the initial 2.9% Q2 nowcast, published on May 6.