In recent news, various significant global events are capturing attention:
- the Israel-Palestinian conflict intensifies;
- Japan’s economy contracted more than anticipated in Q1;
- the Supreme Court is set to review a case that questions Roe v. Wade;
- Amazon is negotiating a deal to acquire MGM, aiming to bolster its entertainment presence;
- investors are focusing on bank stocks as a play for economic recovery;
- Brent crude oil rallied to $70 a barrel;
- the NY Fed Manufacturing Index decreased slightly in May, yet still indicates robust growth;
- US homebuilder sentiment remains steady in May at high levels:
Last week’s trading painted a grim picture across major asset classes, revealing notable downward trends based on exchange-traded funds by the close on Friday, May 14.
Recent developments include:
- Israeli airstrikes on Gaza persist without resolution;
- China’s economy grew at a slower pace in April;
- global supply chains struggle to meet surging corporate demand;
- countries mobilize to address the global semiconductor shortage;
- the anticipated merger of WarnerMedia and Discovery aims to create a media powerhouse;
- the White House is cautiously tracking inflation risks as a potential economic threat;
- Corporate America believes Biden’s tax plan may falter;
- the US stock market’s ‘fear gauge,’ the VIX Index, dropped sharply on Friday:
Our unique strategies have outperformed their common benchmark last week. While the improvement was reflected in smaller declines, it still signifies an advantage over underperformance.
By Daniel Kahneman and co-authors.
Summary from publisher (Little, Brown Spark)
In “Noise,” Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein delve into the detrimental impact of noise across various fields, including medicine, law, economic forecasting, and more. Despite its prevalence, many are unaware of noise and its influence on decision-making. By implementing simple remedies, both individuals and organizations can reduce noise and biases, leading to more effective decisions. Filled with innovative ideas and research-based insights, “Noise” offers a comprehensive understanding of the susceptibility of human judgment to noise and suggests actionable solutions.
In this issue:
- Global markets faced broad losses this week.
- Portfolio strategy benchmarks experienced declines.
Long-Horizon Stock Returns Show Positive Skewness
By Adam Farago and Erik Hjalmarsson (University of Gothenburg)
April 28, 2021
Over extended periods, multiplicative compounding creates significant positive skewness in stock returns, largely influenced by single-period volatility. Thus, for periods exceeding five years, returns—either individual or portfolio—will exhibit positive skewness under sensible conditions. For investors, this pronounced positive skewness suggests that the mean compound return is not a reliable indicator for typical long-horizon outcomes. Furthermore, the substantial impact of compounding on higher-order moments affects the applicability of Taylor expansions used for approximating skewness preferences when evaluating annual returns or longer.
Recent updates include:
- CDC advises vaccinated individuals to forgo masks in most situations;
- Escalation of conflict in Gaza heightened as Israeli ground forces engage;
- Fed governor Christopher Waller predicts that the inflation spike will be short-lived;
- Colonial Pipeline reportedly paid around $5 million to ransomware attackers;
- The US Producer Price Index rose sharply in April;
- US jobless claims continued to decline last week, falling to a new pandemic low:
The US Consumer Price Index rose significantly in April, surpassing estimates. The pressing question is whether this signals the onset of an inflationary phase or merely represents a continuation of temporary fluctuations.
Recent headlines include:
- The deadly conflict persists between Israel and Palestinian militants in Gaza;
- The Colonial Pipeline resumed operations following a ransomware attack;
- GOP Senate Leader expresses a ‘good chance’ of reaching an infrastructure agreement with Biden;
- The US budget deficit soared to a staggering $1.9 trillion within the first seven months of the fiscal year;
- Tesla CEO Elon Musk announced the company stopped accepting bitcoin for vehicle purchases;
- Atlanta Fed business inflation expectations rose once again in May;
- Questions about how long ‘transitory’ inflation will continue;
- US consumer inflation surged in April, reaching a 4.2% annual rate, the highest since 2008:
This revision maintains the original HTML structure while enhancing clarity and flow. It introduces the main topics effectively and concludes by summarizing the significance of the events discussed.
