The risk premium for a broadly diversified, unmanaged portfolio of asset classes is expected to fall in the years ahead. Can this trend be offset by working smarter and making better rebalancing decisions? In theory, yes. In practice, only a minority of investors can avail themselves of benchmark-beating results in the long run. True for individual asset classes, true for asset allocation. That’s the nature of the arithmetic of active management. But if there’s any chance for success on this front, most of the strategic intelligence for improving results will come from within your portfolio, as I discussed a few weeks ago. Carefully monitoring the fluctuations in your asset allocation doesn’t insure that you’ll earn a higher risk premium, but it’s a lot harder (impossible?) to enhance results if you don’t fully exploit this information for managing the portfolio.
Weekly Jobless Claims Closing In On Five-Year Low
Last week’s decline in initial jobless claims puts the data within a statistical hair of a five-year low. That’s a bullish sign for the labor market and, by extension, the economy. Indeed, the latest dip in new claims strengthens last week’s encouraging news of private nonfarm payrolls growth in February. Some analysts continue to press the case that the US economy is in recession, or is slipping into darkness as we speak. But the numbers say otherwise, starting with the labor market, which continues to grow at a modest pace.
US Industrial Production: Feb 2013 Preview
Tomorrow’s report on industrial production for February is projected to post a 0.4% gain, according to The Capital Spectator’s average econometric forecast. The expected gain compares with a slight 0.1% decline in January. Meanwhile, the Capital Spectator’s average February projection is at the low end of consensus forecasts from economists.
February Retail Sales: The Strongest Gain In 5 Months
Retail sales increased at a faster pace in February, advancing 1.1% over January—the most since last September, on a seasonally adjusted basis, the Census Bureau reports. The gains were broad based, with most of the subsectors of sales showing positive monthly comparisons. The upbeat news extends to the crucial year-over-year measure as well, with retail sales climbing 4.6% for the 12 months through February, noticeably faster than January’s 4.2% annual pace. The message here is that consumer spending continues to rise at a modest rate, implying that economic momentum generally is still trending positive.
A New Old Game Plan For Asset Allocation
You have to run faster just to stand still. That’s the message in Bill Bernstein’s recent e-book Skating Where the Puck Was: The Correlation Game in a Flat World
US Retail Sales: Feb 2013 Preview
Tomorrow’s report on US retail sales for February is projected to show a 0.7% gain for the month, according to The Capital Spectator’s average econometric forecast. That’s up from the 0.1% gain reported by the Census Bureau for January. The projection is also at the upper range of consensus forecasts from several surveys of economists.
Introducing The Macro-Markets Risk Index
The idea that the economy and the financial markets are closely connected, and that each offers clues for projecting the other, is no spring chicken. Nearly a century ago, for instance, William Hamilton outlined the case
Book Bits | 3.9.13
● The Locust and the Bee: Predators and Creators in Capitalism’s Future
By Geoff Mulgan
Review via New Statesman
“Capitalism,” writes Geoff Mulgan, “is not so much an aberration as a step on an evolutionary path, and one that contains within it some of the answers to its own contradictions.” In thinking of capitalism in this way, Mulgan voices a contemporary consensus. As advances in biology and genetics have promoted the belief that economic and political development can be understood in evolutionary terms, hundreds if not thousands of books have appeared in recent years claiming to explain the rise and development of capitalism as part of an ongoing process of social evolution.
February Private Payolls: The Best Month For Growth Since November
Private-sector payrolls grew by 246,000 in February on a seasonally adjusted basis—the most since November and at a substantially faster pace compared with January’s relatively tepid rise of 140,000, the Labor Department reports. Meanwhile, the year-over-year percentage change in private payrolls continued to advance at just under 1.9% through last month, or roughly in the range we’ve seen in recent history. In addition, the unemployment rate ticked down to 7.7%, a post-recession low. Is this a sign that growth is set to ramp up in the labor market? Maybe, but that’s a speculative interpretation of today’s data. What we can say with a high degree of confidence is that the moderate growth train of late rolls on.
4-Week Average Of Jobless Claims Drops To 5-Year Low
Jobless claims declined last week by 7,000 to a seasonally adjusted 340,000, which is near a post-recession low. Meanwhile, the four-week moving average for claims broke through the previous floor and touched a new cyclical low last week. The four-week average slipped to 348,750 on a seasonally adjusted basis—the lowest in five years. That’s a fairly potent clue for expecting that the labor market will continue to grow in the near term.