In light of recent developments across the globe, we explore key topics, including potential North Korean policies, economic trends, and significant political events:

• Is North Korea considering a stricter anti-U.S. stance? CNN
• India’s Prime Minister Modi defends a controversial citizenship bill amidst widespread protests: BBC
• China plans to lower import tariffs on a variety of goods: BBG
• Russia promises to respond to U.S. sanctions regarding a new pipeline between Russia and Germany: AP
• The Atlanta Fed’s GDPNow model forecasts a Q4 growth rate of +2.1%, aligning with Q3 figures: AF
• The NY Fed’s Q4 GDP nowcast has been adjusted up to a modest +1.3%: NYF
• Revised data shows U.S. GDP growth maintained at +2.1% for Q3: CNBC
• A recent uptick in U.S. consumer spending reflects a 1-year trend increase to +3.9% in November: WSJ

As we close out another year, it’s time for our annual reflection in The Capital Spectator’s Book Bits column. In keeping with our tradition, we spotlight ten noteworthy titles that have appeared throughout 2019. The selection criteria? These books were chosen for being entertaining, thought-provoking, or insightful. As always, we’ll split this list into two manageable parts, beginning with five today and continuing next week. Enjoy your reading!

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Value Bubbles
Messaoud Chibane and Samuel Ouzan (Neoma Business School)
February 27, 2019
Based on various extended behavioral theories, value profits should correspond to momentum profits and change over time. This study examines these theories in the context of return cross-sections. Our findings demonstrate that value returns are influenced by market conditions. From 1926 to 2018, following negative market returns, the average value premium is three times greater than its unconditional counterpart, while it appears to diminish after positive returns. Additionally, episodes of significant losses in momentum strategies (momentum crashes) often coincide with substantial value profits (value bubbles). These results remain robust to a variety of time-varying risk-based explanations.
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Recent headlines include:

• House passes updated North American trade agreement: WSJ
• The UK Prime Minister’s Brexit legislation is projected to succeed in Parliament: CNBC
• Diplomatic efforts collide with North Korea’s December 31st deadline for U.S. discussions: Reuters
• The U.S. Leading Economic Index stabilized in November after a three-month decline: CB
• Sales of existing homes in the U.S. dropped 1.7% in November: BH
• Philly Fed Manufacturing Index shows growth slowed in December, marking the weakest expansion in six months: PF
• U.S. jobless claims decreased last week after spiking to a two-year high: MW

As the trading year approaches its end, American stocks are on track to outperform major equity markets around the globe, evidenced by a range of listed exchange-traded products in the U.S.

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In significant political news:

• The House has impeached President Trump: Reuters
• House Speaker Pelosi may postpone sending the impeachment articles to the Senate: Politico
• Investor reactions to impeachment appear minimal: MW
• Speculation arises that North Korea may be preparing for a long-range missile test: CNBC
• In India, a large number of individuals have been detained for protesting against the citizenship act: BBC
• Sweden’s Riksbank has become the first central bank to move away from negative interest rates: RTE
• Economists predict continued U.S. expansion in 2020 according to a new survey: WSJ
• UK retail sales experienced a decline in November, marking four consecutive months of falling sales—the worst stretch since 1996: BBG
• The yield curve spread between 10-year and 2-year Treasury bonds has risen to 29 basis points, a six-month high.

The U.S. economy is demonstrating signs of stabilization following a prolonged downturn. While a stronger expansion cannot be definitively ruled out, the evidence remains inconclusive. Notably, the risk of recession appears low, maintaining the trend seen over recent months (assuming a careful examination of various indicators). A comprehensive analysis of diverse data indicates that output is growing at a moderate rate, with near-term expectations aligned with this trend.

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Key developments today include:

• The House is set to vote on impeachment articles against President Trump: The Hill
• Considerations regarding Trump’s policy agenda if he secures re-election: CNBC
• German business sentiment shows improvement in December: Ifo
• The Atlanta Fed’s Q4 GDP growth nowcast has increased to +2.3%: AF
• Job vacancies in the U.S. rose in October after hitting an 18-month low: Reuters
• U.S. industrial output rebounded sharply in November: MW
• Annual increase in U.S. housing starts accelerated to a 1.5-year high in November: CNBC

As the U.S. economy looks to stabilize following its 2019 slowdown, there are indications that the Treasury market is hinting at rising inflation expectations. While it remains to be seen if this latest shift is merely a temporary fluctuation or an early indicator, the recent changes in the market’s implied inflation forecasts warrant close scrutiny in the coming weeks.

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In the latest corporate news:

• Boeing announces that it will cease production of the 737 Max in January: CNBC
• China and Russia advocate for a reduction of UN sanctions on North Korea: Reuters
• The U.S. budget proposal rises to $1.4 trillion: The Hill
• Concerns regarding sluggish job growth in the Midwest may pose challenges for Trump’s re-election: NY Times
• Is the U.S. stock market ready for a “melt-up” rally? MW
• Confidence among U.S. homebuilders surged to a 20-year high this December: CNBC
• The NY Fed Manufacturing Index continues to show subdued growth in December: MW
• Recent data suggest signs of strengthening in the U.S. economy as December progresses: IHS Markit