The Capital Spectator: Investing, Asset Allocation & Economic Insights

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    <p><strong>Recent Trends in the Market</strong></p>
    <ul>
        <li><em>US small-cap stocks are experiencing a resurgence</em></li>
        <li><em>Bonds faced challenges as US payroll data exceeded expectations</em></li>
        <li><em>Most of our strategic portfolio benchmarks reported gains this week</em></li>
    </ul>

    <p><strong>Is the rally in small-cap stocks regaining momentum?</strong> While it's too early to draw definitive conclusions, the current trend appears promising, especially when compared to the negative sentiment observed through mid-July.</p>

    <p><em><a href="https://etfps.substack.com/p/the-etf-portfolio-strategist-6-august">Read more at The ETF Portfolio Strategist</a></em></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/the-etf-portfolio-strategist-6-august-2021/" title="6:53 pm" rel="bookmark"><time class="entry-date" datetime="2021-08-06T18:53:51-04:00">August 6, 2021</time></a>
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    <p>The direction of US economic activity is slightly leaning negative, as indicated by CapitalSpectator.com’s Macro Trend Index (MTI). While the economy continues to grow robustly, the MTI suggests a persistent downside bias, albeit marginal. Therefore, the overall economic signal remains in a neutral zone.</p>

    <p><a href="https://www.capitalspectator.com/us-economic-growth-remains-positive-while-trend-bias-is-neutral/#more-16486" class="more-link">Learn more <span class="meta-nav">→</span></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/us-economic-growth-remains-positive-while-trend-bias-is-neutral/" title="7:37 am" rel="bookmark"><time class="entry-date" datetime="2021-08-06T07:37:03-04:00">August 6, 2021</time></a>
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    <p>* The pandemic pushes tens of millions globally to the <a href="https://www.nytimes.com/2021/08/06/world/africa/covid-19-global-hunger.html">edge of famine</a><br/>* The Delta variant <a href="https://www.wsj.com/articles/july-jobs-report-unemployment-rate-2021-11628196413?mod=hp_lead_pos1">threatens</a> the US labor market recovery<br/>* Infrastructure spending is <a href="https://www.wsj.com/articles/cbo-estimates-infrastructure-bill-would-add-256-billion-to-deficits-11628196739">projected</a> to widen US deficits by $256 billion<br/>* Biden aims for 50% of US cars sold by 2030 to be <a href="https://www.theverge.com/2021/8/5/22610501/biden-2030-ev-goal-trump-emissions-rollback">electric or hybrid</a><br/>* Bond rates are dipping and yield curves are flattening <a href="https://www.marketwatch.com/amp/story/why-investors-should-care-about-falling-global-bond-yields-and-a-flattening-treasurys-curve-11628195039">worldwide</a><br/>* Will the Fed's digital currency plans eventually <a href="https://www.ft.com/content/14b0fc81-ac17-4436-89ac-09d71c15d2af">compete with</a> cryptocurrencies?<br/>* US trade deficit <a href="https://www.wsj.com/articles/us-trade-deficit-imports-exports-june-2021-11628114818">expanded</a> to an all-time high in June<br/>* Last week, US jobless claims <a href="https://finance.yahoo.com/news/weekly-jobless-claims-unemployment-labor-week-ended-july-31-2021-185817187.html">declined</a>, nearing pre-pandemic levels:</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2021/08/claims.06aug2021.png"><img fetchpriority="high" decoding="async" class="alignnone size-full wp-image-16483" src="https://www.capitalspectator.com/wp-content/uploads/2021/08/claims.06aug2021.png" alt="Jobless Claims Graph" width="650" height="450"  /></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-6-august-2021/" title="5:58 am" rel="bookmark"><time class="entry-date" datetime="2021-08-06T05:58:57-04:00">August 6, 2021</time></a>
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    <p>In our upcoming issue, we will introduce a mean-reversion proxy as part of our risk metrics suite. Here’s a sneak peek.</p>

    <p><em><a href="https://etfps.substack.com/p/the-etf-portfolio-strategist-5-august">Read more at The ETF Portfolio Strategist</a></em></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/the-etf-portfolio-strategist-5-august-2021/" title="5:32 pm" rel="bookmark"><time class="entry-date" datetime="2021-08-05T17:32:43-04:00">August 5, 2021</time></a>
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    <p>The 10-year Treasury yield stabilized at 1.19% on August 4, marking the third instance of this rate slipping to 1.19%, which reflects a six-month low.</p>

    <p><a href="https://www.capitalspectator.com/10-year-treasury-yield-fair-value-estimate-5-august-2021/#more-16477" class="more-link">Learn more <span class="meta-nav">→</span></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/10-year-treasury-yield-fair-value-estimate-5-august-2021/" title="7:43 am" rel="bookmark"><time class="entry-date" datetime="2021-08-05T07:43:01-04:00">August 5, 2021</time></a>
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    <p>The Capital Spectator determines the “fair value” of the 10-year Treasury yield by averaging three models:</p>

    <blockquote>
        <p>* GDP growth<br/>* Year-over-year Consumer Price Index (headline)<br/>* Federal Reserve assets as a percentage of GDP<br/>* Fed funds target rate<br/>* 1-year/3-year curve to estimate Fed bias</p>
    </blockquote>
    <p>For deeper insights into the fair-value estimates of the 10-year yield, explore these CapitalSpectator.com articles:</p>
    <p><a href="https://www.capitalspectator.com/estimating-fair-value-for-the-10-year-treasury-yield/">“Estimating Fair Value For The 10-Year Treasury Yield”</a><br/>
    <a href="https://www.capitalspectator.com/estimating-fair-value-for-the-10-year-treasury-yield-part-ii/">“Estimating Fair Value For The 10-Year Treasury Yield, Part II”</a><br/>
    <a href="https://www.capitalspectator.com/estimating-fair-value-for-the-10-year-treasury-yield-part-iii/">“Estimating Fair Value For The 10-Year Treasury Yield, Part III”</a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/10-year-treasury-yield-fair-value-estimate/" title="6:36 am" rel="bookmark"><time class="entry-date" datetime="2021-08-05T06:36:56-04:00">August 5, 2021</time></a>
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<div class="entry-content">
    <p>* US Covid-19 cases <a href="https://www.reuters.com/world/us/us-covid-19-cases-hit-six-month-high-over-100000-reuters-tally-2021-08-05/">reach</a> a six-month peak<br/>* The Federal Reserve's vice chair <a href="https://www.reuters.com/world/us/feds-clarida-backs-raising-interest-rates-2023-2021-08-04/">suggests</a> a potential rate hike in 2023<br/>* Are US jobless claims <a href="https://www.wsj.com/articles/weekly-jobless-claims-08-05-2021-11628113581">settling</a> at a new normal?<br/>* Global growth diminished to a four-month low in July according to <a href="https://www.markiteconomics.com/Public/Home/PressRelease/a33a436e0b4047f7930dfc5e2d45c2cf">PMI survey data</a><br/>* The global market for negative-yielding bonds <a href="https://www.ft.com/content/43280fe3-b6cd-44e1-bb75-25b0962b5ba1">rose</a> to a six-month high at $16.5 trillion<br/>* German factory orders <a href="https://www.fxstreet.com/news/german-factory-orders-rebound-41-mom-in-june-eur-usd-unfazed-202108050603">increased</a> more than anticipated in June<br/>* The ISM Services Index <a href="https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/july/">rose</a> in July, hitting a record high (since 1997)<br/>* US companies hired significantly fewer workers than expected in July, according to ADP <a href="https://adpemploymentreport.com/2021/July/NER/NER-July-2021.aspx">reports:</a></p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2021/08/adp.05aug2021.png"><img decoding="async" class="alignnone size-full wp-image-16470" src="https://www.capitalspectator.com/wp-content/uploads/2021/08/adp.05aug2021.png" alt="ADP Employment Graph" width="744" height="451"  /></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-5-august-2021/" title="6:00 am" rel="bookmark"><time class="entry-date" datetime="2021-08-05T06:00:32-04:00">August 5, 2021</time></a>
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    <p>An unusual spell of low risk persists for the Global Market Index (GMI), which is an unmanaged, market-value-weighted portfolio representing all the <a href="https://www.capitalspectator.com/major-asset-classes-july-2021-performance-review/">major asset classes</a> (excluding cash). Following another monthly gain in July, the risk-adjusted performance has once again improved.</p>

    <p><a href="https://www.capitalspectator.com/major-asset-classes-july-2021-risk-profile/#more-16462" class="more-link">Learn more <span class="meta-nav">→</span></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/major-asset-classes-july-2021-risk-profile/" title="7:18 am" rel="bookmark"><time class="entry-date" datetime="2021-08-04T07:18:09-04:00">August 4, 2021</time></a>
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<div class="entry-content">
    <p>* The Biden administration <a href="https://www.npr.org/2021/08/03/1024345276/the-biden-administration-plans-a-new-eviction-moratorium-after-a-federal-ban-lap">announces</a> a new national eviction moratorium<br/>* The Delta variant represents the <a href="https://www.nytimes.com/2021/08/04/world/asia/china-delta-covid-testing-outbreak.html">largest challenge</a> for China since the onset of the pandemic<br/>* Bond yields remain <a href="https://www.bloomberg.com/news/articles/2021-08-04/japan-10-year-bond-yield-falls-to-zero-for-first-time-this-year">under pressure</a> amid concerns over the Delta variant<br/>* US businesses hold <a href="https://www.wsj.com/articles/businesses-are-loading-up-on-credit-spending-could-follow-11628069581">unprecedented amounts</a> of unused credit from banks<br/>* China’s economic growth <a href="https://www.markiteconomics.com/Public/Home/PressRelease/d5264c7e59614a3f9851003495b0ff6b">picked up</a> in July as indicated by the Composite Output Index<br/>* The Eurozone economy <a href="https://www.markiteconomics.com/Public/Home/PressRelease/6c1e77be8a2a453d813bcdeb44227965">grew</a> in July at its fastest rate since 2006<br/>* Inflationary pressures in the UK reached a <a href="https://www.markiteconomics.com/Public/Home/PressRelease/41ebe88418ce43c2a7947d859f31d61d">record high</a> in July<br/>* US factory orders <a href="https://www.reuters.com/article/usa-economy-manufacturing/u-s-factory-orders-beat-expectations-in-june-business-spending-on-equipment-solid-idUSL1N2P91RL">rose</a> more than anticipated in June:</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2021/08/orders.04aug2021.png"><img decoding="async" class="alignnone size-full wp-image-16460" src="https://www.capitalspectator.com/wp-content/uploads/2021/08/orders.04aug2021.png" alt="Factory Orders Graph" width="650" height="450"  /></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-4-august-2021/" title="6:19 am" rel="bookmark"><time class="entry-date" datetime="2021-08-04T06:19:32-04:00">August 4, 2021</time></a>
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<div class="entry-content">
    <p><strong><em>Correction: The data table below was incorrectly labeled as June 2021; it should be July 2021. We apologize for the error.</em></strong></p>
    <p>The projected risk premium for the Global Market Index (GMI) remained stable in July at an annualized 6.0%, unchanged from the <a href="https://www.capitalspectator.com/risk-premia-forecasts-major-asset-classes-2-july-2021/">previous month</a>. This level is relatively high compared to estimates from recent history. The forecast indicates the long-term outlook for GMI’s return over the “risk-free” rate, which is reflected by the yield on a 3-month Treasury bill.</p>
    <p><a href="https://www.capitalspectator.com/risk-premia-forecasts-major-asset-classes-3-august-2021/#more-16455" class="more-link">Continue reading <span class="meta-nav">→</span></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/risk-premia-forecasts-major-asset-classes-3-august-2021/" title="6:54 am" rel="bookmark"><time class="entry-date" datetime="2021-08-03T06:54:10-04:00">August 3, 2021</time></a>
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