The economy’s pace of jobs creation accelerated in December, according to this morning’s update of the ADP Employment Report. Private sector payrolls increased by 215,000 last month, a robust increase from November’s upwardly revised 148,000 gain. That’s the biggest monthly gain since February. The implication, of course, is that tomorrow’s official report on payrolls from the US Labor Department will deliver upbeat news as well.
Will Relatively Low Inflation Expectations Persist In 2013?
The new abnormal is still with us in the new year, but will 2013 break this strange relationship? I’m referring to the unusually close positive connection between the stock market and the implied inflation forecast via the yield spread between the 10-year Treasury Note and its inflation-indexed counterpart. Historically speaking, expectations of higher inflation haven’t been a reliable source of enthusiasm for the bulls, but the last several years have turned that rule on its head. When the Treasury market smells higher inflation these days, equities tend to rally, and vice versa. That’s been the dance for much of the past five years. Will it continue in the year ahead?
ISM Manufacturing Index Rises For December
The manufacturing sector closed 2012 on an upbeat note, according to today’s December report for the ISM Manufacturing Index. This widely followed benchmark rose to 50.7, up from 49.5 in November. A reading above 50 is considered a sign of growth and so the manufacturing sector overall is again leaning towards the forces of light rather than darkness, if only slightly.
Major Asset Classes | December 2012 | Performance Review
The year just passed was kind to investors holding risky assets. The Global Market Index (GMI), a passive benchmark that holds a broad mix of the world’s major asset classes, posted a strong 11.0% total return in 2012. That’s a sharp rebound from 2011’s disappointing 1.1% decline.
A Sober New Year…
It seems that we have a new fiscal deal in a new year. For the moment, at least: “U.S. President Barack Obama and Senate leaders Monday reached a New Year’s budget agreement that would let income-tax rates rise for the first time in nearly 20 years, maintain unemployment benefits for millions of people and blunt the impact of spending cuts that were looming as part of the so-called ‘fiscal cliff.'” A hair of the fiscal dog, one might say. Well, it’s been a good year so far. Of course, the legislation still has to receive the green light from the House. Better keep that extra bottle of bubbly handy, just in case. The only question: Will we need it to celebrate or mourn? Stay tuned….
ISM Manufacturing Index: December 2012 Preview
The last entry on The Capital Spectator for the year, and the first look at how manufacturing activity fared in 2012’s final month in the ISM report later this week. The stakes are higher than usual, as the nation braces for blowback from the still-unresolved fiscal cliff mess. Much like the political dialog in Washington these days, the December update on the ISM Manufacturing Index (scheduled for release on Wednesday, January 2) is expected to dance on the edge of a knife and remain precariously poised on or near the neutral 50 mark. The Capital Spectator’s average econometric forecast anticipates a reading of 49.9, a statistical hair into the terrain of contraction, or moderately below the relatively upbeat 50-plus predictions from economists generally via consensus survey data.
Best of Book Bits 2012 (Part II)
Here’s the second installment to last week’s recap of The Capital Spectator’s short list of titles from 2012 that deserve a second look. Each of the following reviews and summaries appeared earlier in the year on these pages, and here they are once more… an encore presentation.
Does Sub-Saharan Africa Deserve A Slice Of Your Portfolio?
“One of the most remarkable features of the global economy over the past fifteen years has been the striking surge of economic growth over much of sub-Saharan Africa,” Charles Collyns, assistant secretary for international finance at the US Treasury, advised earlier this month. We’ve heard this story before, of course, only to discover that the investment results fell short of the headlines. Is it different this time? Possibly. For some perspective, let’s spin a few numbers and take a look at an ETF that focuses on investing in the stock markets in this neck of the world.
A Surprisingly Positive Final 2012 Update On Jobless Claims
Jobless claims posted a surprisingly robust decline last week vs. expectations. Today’s update offers more evidence for thinking that the labor market continues to expand and will continue to do so in early 2013, and perhaps with more upward momentum than generally recognized. It all adds up to an encouraging bit of news for thinking positively for jobs growth in early 2013. The fiscal cliff nonsense may throw a wrench into the macro machine, but the final number on the labor market released in 2012 suggests that the case for optimism is very much alive and kicking via the data.
Obsessing Over The Trees (And Overlooking The Forest)
With the year nearly complete, what have we learned in 2012 from an investing perspective? The main lesson is a familiar one, but one that is too often trampled under the noise of the moment. Focusing on the portfolio is (still) the primary objective, as Markowitz told us all those years ago. More than half a century later, theory and the empirical record are in rare state of agreement: portfolio design and management take a back seat to nothing as critical factors for engineering investment success.