The Capital Spectator: Investing, Asset Allocation, and Economic Insights

The Treasury market is increasingly anticipating another interest rate hike by year’s end. The policy-sensitive 2-year yield rose to 1.60% on October 24, marking its highest point since 2008. This upward movement indicates a prevailing hawkish sentiment in fixed-income trading.
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China’s President Xi Sets Stage for Extended Rule: BBC
UK GDP Growth Accelerates to 0.4% in Q3 despite Brexit: Sky News
US Composite Output Index Hits 9-Month High in October: IHS Markit
Richmond Fed Manufacturing Index Slightly Dips in October, Remains Positive: Richmond Fed
Rising Earnings of Key Companies Bolster Market Optimism: Bloomberg
Trump Consults Senate Republicans on Selecting a New Fed Chair: Reuters
US Economic Confidence Rebounds Following Negative Print Early in 2017: Gallup
US 10-Year Treasury Yield Reaches Five-Month High: MarketWatch

While US economic activity has recently shown signs of slowing, a range of indicators suggests that the overall trend remains robust.
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Japan Informs South Korea of “Critical, Imminent” North Korea Threat: Reuters
Chicago Fed National Activity Index Recovers in September: MarketWatch
Business Economists Forecast Stronger Growth in Q4: CNBC
Do New Tax Cuts Present a Threat to the US Economy? CNBC
Eurozone PMI Reports Fastest Job Growth in Over a Decade: IHS Markit
US Government Fiscal Deficit Deepest in Four Years for FY2017: Haver Analytics
Investors Flocking to Flatter Yield Curve Bets: Bloomberg

Last week saw declines among most major asset classes, according to a range of exchange-traded products. However, three sectors managed to defy the downward trend: US equities, US junk bonds, and high-yield foreign bonds.
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Catalonia Crisis Escalates as Madrid Assumes Control: BBC
Italy’s Lombardy and Veneto Regions Vote for Autonomy: Bloomberg
Japan’s Abe Secures Majority in Parliamentary Elections: Nikkei
Trump Proposes “Biggest Tax Cuts Ever” in TV Interview: Fox
US Existing Home Sales Experience Rebound in September: Reuters
Yellen: Fed is Making “Good Progress” in Reducing Bond Portfolio: NY Times
Is the Oil Market Underestimating Demand from China? Bloomberg
Bitcoin Market Capitalization Surpasses $128 Billion: Sydney Morning Herald
US 10-Year Treasury Yield Reaches Three-Month High:

The edition of The US Business Cycle Risk Report for October 22 has been published and emailed to subscribers.

● A Century of Wealth in America
By Edward N. Wolff
Review via Publishers Weekly
Wolff (Top Heavy), an economics professor at New York University, echoes themes from Thomas Piketty’s “Capital in the Twenty-First Century,” providing an in-depth examination of wealth accumulation, distribution, and preservation in the United States. Wolff highlights the increasingly precarious situation of the middle class and the growing income inequality. He reveals that the affluent demographic in America is predominantly white, married, well-educated, older, and most likely self-employed in financial services or business professions. Meanwhile, the remaining 99% of the population have seen their incomes stagnate since the 1970s, largely compensating through increasing household debt to maintain living standards rather than indulging in extravagant consumption.
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While yields remain low, the Federal Reserve is anticipated to raise interest rates further. Traditionally, this scenario casts bonds as a less appealing asset class. However, recent analysis by AQR Capital Management suggests a more nuanced perspective when considering fixed-income investments within an asset allocation strategy.
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UK Prime Minister Seeks EU Assistance with Brexit: Guardian
Trump Supports Fed Governor Powell for Next Fed Chair: Politico
Analysts Project Low Returns Across Asset Classes: Bloomberg
US Leading Index Experiences First Decline in 12 Months: Conference Board
US Jobless Claims Reach 44-Year Low for the Week Ending October 14: MarketWatch
Philly Fed Manufacturing Index Surprises with Solid Rise for October: RTT
La Nina Forecast to Bring Warmer-than-Normal Temperatures to the US This Winter: CNBC