Market Overview
Driven by a wave of optimistic sentiment, prices surged across all major asset classes last week, as indicated by a variety of exchange-traded funds. This broad-based rally represents the first instance in six weeks that every segment of global markets has experienced upward momentum, concluding by Friday, March 15.
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Weekly News Highlights
Midwest rivers surge to record heights, prompting evacuations: USA Today
Federal Reserve expected to maintain pause on interest rate hikes in Wednesday’s announcement: WSJ
Russia confirms compliance with OPEC production cuts: CNBC
Consumer Sentiment Index in the US climbs for the second consecutive month in March: MW
Concerns grow among US business leaders about an impending recession, according to consultancy reports: MW
New job openings in the US hit a record high of 7.6 million in January: CNBC
New York Fed Manufacturing Index indicates sluggish growth in the region for March: MW
US industrial production‘s annual trend eases to the mildest growth in eight months as of February:
Book Recommendation
● The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs
By Pat Garofalo
Summary via publisher (Thomas Dunne Books)
This insightful book provides a thorough examination of how politicians have allowed the entertainment industry to exploit taxpayers, skew public policies, and diminish economic investment, encapsulated by the era of Trump. Governments have invested billions in tax incentives, subsidies, and grants to attract large corporations and events such as the Super Bowl, hoping to stimulate local economies and create better job opportunities. However, substantial evidence reveals that aligning public policy with the aspirations of Big Entertainment often results in disappointing outcomes for taxpayers.
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Research Spotlight
Factor Timing Revisited: Alternative Risk Premia Allocation Based on Nowcasting and Valuation Signals
Olivier Blin (Unigestion), et al.
September 10, 2018
Growing interest surrounds alternative risk premia among investors. The existing academic literature has largely focused on describing various alternative risk premia (such as momentum, carry, and value strategies) individually. In this article, we explore portfolio allocation across a diverse range of cross-asset alternative risk premia from 1990 to 2018. We develop an active (macro risk-based) allocation framework aimed at leveraging the distinct behavior of alternative risk premia in varying macroeconomic regimes and over time. Our backtests of this allocation strategy in out-of-sample settings reveal its significant predictive power.
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Global Events Update
Tragedy strikes as shootings at two mosques in New Zealand claim 49 lives: BBC
North Korea considers lifting its ban on missile and nuclear tests: Reuters
Israel launches a military offensive in Gaza following rocket attacks on Tel Aviv: USA Today
The Senate issues a rebuke to Trump by voting against the border emergency declaration: Reuters
Economists revise US growth estimates downward in a recent survey: WSJ
New home sales in the US drop by 6.9% in January: CNBC
US import prices climb by 0.6% in February, but decreased by 1.3% over the past year: MW
Jobless claims in the US rise to a one-month high last week: MW
Economic Outlook
Bloomberg reports that “there are reasons to expect the current slowdown [in the global economy] will prove short-lived.” Similar analyses may also pertain to the US economy, as suggested by The Capital Spectator’s in-depth business-cycle analytics.
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Regulatory News
The US grounds Boeing 737 Max while halting new deliveries of the aircraft: Reuters
The Senate votes to end US military support for Saudi-led operations in Yemen: USA Today
UK Parliament rejects a no-deal Brexit: CBS
Trump states he is in no hurry to finalize a US-China trade deal: CNBC
Is the worst of the global economic slowdown over? Bloomberg
China sees a drop in its industrial growth rate, the lowest in 17 years at the start of 2019: Reuters
US construction spending witnessed its most significant increase in nine months during January: Reuters
US durable goods orders increased in January, marking the third month of gains: MW
Fed Interest Rate Insights
Current projections indicate that the likelihood of the Federal Reserve raising interest rates through early 2020 is extremely low, based on Fed funds futures. This sentiment is primarily driven by mounting evidence of economic deceleration coupled with low inflation rates. As long as these dual factors persist, which recent data suggests is probable, the Fed’s recent cycle of policy tightening appears to have concluded, with the possibility of a reversal later in the year.
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Brexit and Economic Observations
UK Parliament rejects the Brexit deal, leading to chaos as Britain prepares to exit the EU: CNN
Boeing 737 MAX aircraft remain operational in the US, despite being grounded in other countries: Reuters
China offers assistance to Venezuela to resolve ongoing power outages: Reuters
US small business optimism increases in February for the first time in nearly six months: Axios
Consumer inflation sees a slight uptick in February—marking the first increase in four months: CNBC
The VIX Index, reflecting US stock market volatility, plummets to near a five-month low:
Sector Performance Analysis
The industrial sector remains the standout performer in the US stock market thus far in 2019, as indicated by a range of exchange-traded funds. While all major equity sectors have shown positive results this year, the industrials hold a commanding lead as of the market close on March 11.
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In conclusion, last week’s positive market sentiment reflects a significant rebound across major asset classes, highlighting growing optimism for economic conditions. Despite certain global and local challenges, key sectors, especially industrials, continue to show promise as we head further into 2019.
