The anticipation surrounding Thursday’s “advance” GDP report for the first quarter has shifted dramatically in just one month. Back in late March, economists projected US growth at over 1.5%, with some even suggesting a range in the low 2% (seasonally adjusted annual rate). However, recent weeks have seen these expectations significantly downgraded, with one firm estimating a mere 0.1% increase for Q1. Although Econoday.com predicts a slightly more optimistic 0.7%, this figure still indicates a marked slowdown from last year’s Q4 growth of 1.4%.
● US new home sales declined in March, following upward revisions in previous months | MarketWatch
● The Dallas Fed manufacturing index fell more than expected in April | Business Insider
● The Fed is keeping options open for a prospective June interest rate hike | Bloomberg
● Nearly two-thirds of Americans prefer saving over spending | Gallup
● Analysis on the Fed’s inflation failure | Narayana Kocherlakota (Bloomberg)
Last week’s top-performing sector was commodities, which saw gains for the third consecutive week, according to a range of ETFs tracking major asset classes. While this surge has not substantially mitigated the steep year-over-year losses still affecting commodities, the rally in raw material prices so far this year marks the strongest upswing since the bear market began impacting these markets back in 2014.
● PMI reports the weakest growth in US manufacturing since September 2009 | Markit
● The Fed is expected to maintain current rates this week while keeping a hike on the horizon | Reuters
● Lackluster GDP figures complicate the Fed’s rate-hiking strategy | Market Watch
● The US Financial Stress Index remains just below a significant stress level | Cleveland Fed
● Bond investors are now taking unprecedented risks | Bloomberg
● Business confidence in Germany weakened in April | Bloomberg
● Hidden high investing fees can negatively impact your returns | NY Times
● Middle Eastern economies are facing revenue drops from oil, according to the IMF | WSJ
● A Future Beyond Growth: Towards a Steady State Economy
Edited by Haydn Washington, Paul Twomey
Summary via Publisher (Routledge)
This book argues that the quest for continual economic growth is fundamentally unsustainable and explores how society can transition to a steady-state economy. Bringing together influential thinkers globally, it examines key issues related to the current system’s deep-rooted problems and the vital elements of a steady-state economy, including population, consumption, ethics, and the necessary policy changes. The conclusion synthesizes these themes, outlining how we can progress towards a truly sustainable future.
Prospects for a recovery in US manufacturing for the second quarter were diminished by the initial April estimate of Markit’s Purchasing Managers’ Index (PMI). This sentiment indicator dropped to its lowest level in more than six years. While the data still indicates growth, it is occurring at a painfully slow pace.
The Market Portfolio is NOT Efficient: Evidences, Consequences and Easy to Avoid Errors
Pablo Fernandez (University of Navarra), et al.
March 16, 2016
The research argues that the market portfolio is inefficient, highlighting evidence that equal-weighted indexes have outperformed market-value weighted indexes over many years. Various easy-to-construct portfolios, including “smart-beta” and “multi-factor” strategies, have consistently outperformed market-cap weighted indexes. The study provides evidence from seven equal-weighted indexes, including the S&P 500 and MSCI Emerging Markets, that demonstrate higher returns compared to their corresponding market-cap weighted counterparts. Despite this, many finance texts still advocate diversifying in line with broad market indexes such as the S&P 500, leading to common misconceptions among investors about efficiency in portfolio construction
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● US jobless claims have reached a 42-year low | MarketWatch
● The Chicago Fed National Activity Index has decreased in March | 24/7 Wall St
● The Philly Fed Index has unexpectedly dipped into negative territory in April | RTT
● The US Leading Economic Index saw a slight increase in March | Conference Board
● Consumer Comfort Index in the US fell last week | Bloomberg
● The US House Price Index increased slightly in February | Builder Mag
● Eurozone remains in a slow growth phase at the start of Q2 | Markit
● BOJ officials are considering negative rates on loans | Bloomberg
US economic activity has continued to slow, as indicated by the latest update of the Chicago Fed National Activity Index (CFNAI) released this morning. The index’s three-month average (CFNAI-MA3) fell to -0.18, marking a three-month low. While this is still above the critical threshold of -0.70 that signals the onset of recessions, this update reinforces the notion that US growth decelerated in the first quarter. The upcoming GDP report from the Bureau of Economic Analysis is anticipated to reflect this sluggish performance.
The US stock market appears poised to shake off its bear-market constraints and potentially surprise analysts who have offered cautious forecasts in recent months. Observations over the past month indicate that a previously expressed warning regarding US business-cycle risk may have been overblown. As reflected in recent reviews of economic indicators, the US economy has not entered a recession as of March, based on available data. Following the equity market’s recent rally, concerns about a potential bear market in stocks may soon be alleviated.
