In August, the estimated risk premium for the Global Market Index (GMI) climbed to 5.0%, which is a 20 basis point increase compared to the previous month’s figure. This long-term forecast, which may vary slightly each month, indicates expected performance above the “risk-free” rate as dictated by a risk-based model (more details are provided below).
Health experts anticipate a potential resurgence of Covid-19 infections this winter: CNBC
Trump’s visit to Kenosha sparks controversy: Reuters
US-Russia military tensions are escalating globally: NYT
Treasury Secretary urges additional government stimulus for the US economy: BBG
Fed’s Brainard advocates for stronger central bank support of the economy: MW
Australia experiences its first recession in decades: WSJ
Global manufacturing growth accelerated in August, reaching a 21-month high: IHS Markit
China’s manufacturing PMI soared to a nine-year high in August: CNBC
Home prices surged 5.5% in July, significantly outpacing the 1.0% CPI inflation: CoreLogic
US construction spending increased in July, marking the first monthly gain since February: Reuters
August saw a resurgence in US manufacturing activity, reaching its fastest pace since late 2018: ISM
August proved to be another month characterized by risk-on sentiment. Across most major asset classes, significant gains were observed, with the exception of investment-grade bonds in the US and foreign government debt in developed markets.
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Trump’s visit to Kenosha raises concerns about inflaming racial tensions: AP
The US announces new economic support for Taiwan in response to China’s actions: Reuters
China’s manufacturing sector continued its recovery in August, according to PMI survey data: CNBC
Despite Trump’s tariffs, China’s exports are surging: NYT
China’s economic growth is projected to decelerate to 2% in 2020: BBG
The Eurozone manufacturing sector maintained a modest recovery in August: IHS Markit
India’s economy experienced a record contraction in Q2: CNN
Real yields on US corporate bonds became negative for shorter maturities: FT
US equities spearheaded a global market rally for the trading week ending August 28, according to a variety of exchange-traded funds. Aside from investment-grade bonds in the US, risk-on sentiment benefitted nearly every aspect of the major asset classes.
The FDA is set to fast-track a coronavirus vaccine even before phase three trials are completed: CNBC
A clash between Trump supporters and Oregon protesters resulted in one death: AP
Democrats are weighing their response after the US intelligence chief halted election security briefings: USAT
Protests continue in Belarus, demanding the president’s resignation: BBC
Is the Fed equipped to implement its new monetary policy? WSJ
Warren Buffett’s Berkshire Hathaway acquires stakes in leading Japanese trading firms: CNBC
US consumer spending growth decelerated in July, increasing for the third consecutive month: CNBC
Mauro F. Guillen
Review via Eurasia Review
“Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen.” This quote from John Steinbeck, featured in the closing chapter of Mauro F. Guillen’s work, aptly summarizes the book’s theme. It offers an exploration of the world’s state in 2030 and highlights shifting demographics. Much of the text elaborates on how the human population is expected to transform dramatically by that year.
Another week has passed, and once again, the risk-on trend continues. US stocks have emerged as leaders across global markets this week, with the SPDR S&P 500 (SPY) jumping 3.3% by the close of the trading week ending August 28, marking the fund’s fifth consecutive weekly gain. However, bonds faced challenges, as the Vanguard Total US Bond Market (BND) dipped 0.6% this week, resulting in its second loss in three weeks.
Fire Sale Risk and Expected Stock Returns
George O. Aragon (Arizona State U.) and Min S. Kim (Michigan State U.)
July 29, 2020
In this study, we assess a stock’s exposure to fire sale risk by examining its ties to equity mutual funds that experience outflows during periods of systematic withdrawals from the industry. Our findings indicate that stocks with higher exposure yield superior average returns: a portfolio purchasing (shorting) these stocks outperforms by 3-7% annually. These results are applicable beyond previously recognized drivers of average returns and underscore the relevance of risks linked to shareholder constraints on stock prices.
Putin cautions Belarusian protesters that Russia could intervene: NYT
Japan’s Prime Minister Abe has resigned due to health issues: Reuters
The Fed’s new inflation strategy is met with skepticism from several analysts: BBG
Key highlights from Trump’s speech accepting the Republican nomination: CNBC
US consumer spending is expected to show growth in the upcoming July report: WSJ
Pending home sales in the US increased for the third consecutive month in July: Reuters
The economic sentiment in the Eurozone has improved for the third month: Reuters
German consumer morale has dipped, raising concerns about the recovery trend: Reuters
The KC Fed Manufacturing Index showed moderate growth in August, improving from June and July: KCF
US Q2 GDP contraction has been slightly adjusted upwards to an annualized 31.7% loss: MW
US jobless claims exceeded one million for the second consecutive week: CNBC
As we reflect on the latest economic and market trends, it is clear that fluctuations in risk sentiment continue to influence global markets. Analysts are keeping a close watch on various factors, including government policies, consumer behavior, and economic indicators that may affect future performance.
In conclusion, the developments in economic sentiment and risk sentiment from August 2020 underline a complex landscape for investors. The ongoing analysis of these trends is crucial for making informed decisions in the ever-evolving market environment.
