As new developments unfold globally, several key stories are making headlines:
- China reports 140 new cases of a Sars-like virus: CNBC
- Supply disruptions in Iraq and Libya cause a rise in oil prices: Bloomberg
- The White House intends to maintain pressure on Iran: WSJ
- Hundreds of migrants are attempting to cross Mexico’s southern border: Reuters
- Venezuela’s Guaidó violates a travel ban to attend a counter-terrorism meeting: BBC
- A global survey indicates that capitalism is perceived as causing ‘more harm than good’: Reuters
- Palladium’s remarkable surge is expected to persist: Bloomberg
- New U.S. housing construction saw significant growth in December: MW
- U.S. industrial production continues its decline in December: MW
- Job openings in the U.S. dropped in November to a 1.5-year low: Reuters
By Daniel Susskind
Review via The New York Times
In his latest book, Daniel Susskind, an economist at Oxford, argues that the fear of technology replacing humans is more justified than ever. As machines grow increasingly intelligent, they threaten to take over many occupations, potentially including doctors, bricklayers, and insurance adjusters—marking the end of what he calls the “Age of Labor.” Without proactive measures, he warns, the economic inequalities we witness today will worsen, leading to an even greater divide between the wealthy and the poor.
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Macro News and Long-Run Volatility Expectations
Anders Vilhelmsson (Lund University)
December 10, 2019
This paper proposes a novel, model-free technique for assessing long-term shifts in expected volatility through VIX futures contracts. My analysis reveals that long-term assessments yield significantly different findings compared to studies that focus solely on realized variance and the VIX. Furthermore, I observe that FOMC announcements typically clear up uncertainty, but predominantly during periods of higher-than-normal policy uncertainty. Conversely, real sector macro announcements tend to elevate long-term volatility during times of low policy uncertainty, though this effect reverses when policy uncertainty is high.
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Key updates from the political and economic arenas:
- Trump’s impeachment hearing commences in the Senate: WSJ
- Another death linked to a new SARS-like virus has been reported in China: CNN
- China’s GDP grew by 6.1% in 2019, marking the slowest increase since 1990: CNBC
- The decline in UK retail sales persisted through December: Bloomberg
- U.S. jobless claims continue to decrease, indicating a robust labor market: CNBC
- Homebuilder confidence in the U.S. did drop slightly in January, yet remains optimistic: CNBC
- Trends in U.S. import prices remained modest in December: Reuters
- Philly Fed manufacturing index experienced a notable rise in January: Philly Fed
- U.S. retail spending picked up in December with an impressive annual increase of 5.8%, marking a 1.5-year high:
Earlier this month, we examined the recent performance of the S&P 500 Index in a historical context. Now, let’s expand our analysis to encompass risk. As we will discover, determining whether risk levels are atypical hinges on how one defines risk. This adds a significant layer of subjectivity to this area of market analysis.
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The recent U.S.-China trade deal marks a significant step in easing tensions: WSJ
Here’s an in-depth look at the U.S. goods China has committed to purchase as part of this trade agreement: CNBC
However, crucial elements of this deal are already in question: Bloomberg
Senate proceedings to contemplate President Trump’s removal begin: Reuters
In a surprising move, Russia’s government has resigned, paving the way for President Putin to consolidate power: CNBC
Fed Beige Book indicates a modestly favorable outlook for 2020: MW
The NY Fed Manufacturing Index showed moderate growth in December: NY Fed
Business inflation expectations have remained steady at +1.9% in January: Atlanta Fed
The VIX Index has returned to a level near a two-year low following a recent spike:
Strong momentum has carried many segments of the global equity markets into 2020, though performance remains uneven. Here’s a concise overview of how the recent bullish trend looks for U.S. and global stock markets, based on a selection of exchange-traded funds:
President Trump is preparing to sign a significant trade deal with China this Wednesday: Bloomberg
Anticipations for this new trade deal are muted: CNBC
Meanwhile, the Senate gears up for the impeachment trial: CNN
Iran dismisses the idea of a new deal with Trump regarding its nuclear capabilities: Reuters
The Eurozone saw a rebound in industrial output for December, though the overall trend remains negative: FT
Softer-than-expected inflation data from the UK suggests that the Bank of England may cut rates: Bloomberg
U.S. small business optimism decreased in December but remains historically strong: NFIB
The core consumer inflation rate in the U.S. dropped to an annual pace of +2.2% in December:
The narrative of economic pessimism in the U.S. has faced significant fluctuations over the past few years. The macro trend has wavered multiple times since the last official recession concluded in 2009, yet each time the economy has rebounded, maintaining its expansion. However, new skepticism reemerged in the latter half of 2019, bringing with it a resurgence of dark forecasts. For the time being, the pessimists have been proven wrong once again, as signs suggest a slight uptick in growth. Upcoming key data releases will put the case for optimism to the test. Here’s a brief overview of the economic reports expected in the days ahead.
U.S. Defense Secretary asserts that the U.S. retains the right to strike Iranian proxies in Iraq and Iran: NPR
The U.S. Treasury has lifted its ‘currency manipulator’ designation for China ahead of the trade agreement: BBC
GOP senators are unlikely to dismiss the charges against Trump before the trial: Reuters
Upcoming U.S.-Eurozone trade discussions are in focus next week: Bloomberg
The U.S. budget deficit exceeded $1 trillion in 2019, marking a seven-year high: CNBC
Rising food prices have pushed India’s inflation to a five-year peak: Reuters
BlackRock places climate change at the forefront of its investment strategy: Fortune
Economic challenges intensify in Iran as public patience dwindles:
