Latest Economic Developments
● ADP Reports Stronger-than-Expected US February Payroll Growth | WSJ
● Fed Beige Book: US expansion with varying wage growth | Bloomberg
● US mortgage applications fall 4.8%, despite rate drop | CNBC
● Eurozone retail sales climb for the third consecutive month | MarketWatch
● PMI: Eurozone economic growth at a 13-month low as France contracts | Markit
● PMI: Chinese service sector expands at a slower pace in February | Markit
According to the ADP Employment Report for February, US companies added 214,000 workers to their payrolls last month. This news supports the notion that the economic expansion is not at immediate risk of slipping into recession. In fact, the latest figures encourage optimism for a potential upward revision in the near-term outlook.
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The implied inflation forecast in the US Treasury market has experienced a sharp uptick in recent days, following an unusual low last month. This fluctuating sentiment continues, now with an upward tilt. The spread between the nominal 10-year yield and its inflation-indexed counterpart reached 1.48% yesterday (March 1), according to daily data from Treasury.gov. While still low compared to the historical range of about 1.5%-2.5%, this increase is notable when contrasted with mid-February, during which the inflation forecast dipped to 1.18%.
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● US ISM Manufacturing Index rises but still signals contraction in February | RTT
● PMI: The weakest increase in US manufacturing output in February since October 2013 | Markit
● US construction spending increased by 1.5% in January | AP
● Eurozone Manufacturing PMI growth drops to a 12-month low in February | Markit
● Eurozone unemployment rate falls to 10.3% in January, a 4.5-year low | BBC
● Global Manufacturing PMI indicates stagnation in February | Markit
● Super Tuesday: Clinton and Trump achieve significant victories; Cruz prevails in Texas; Rubio claims his first win | CNN
● Moody’s downgrades China’s outlook citing reform and fiscal risks | Reuters
February saw a substantial demand for safe assets, with developed market foreign government bonds emerging as the primary beneficiaries of the risk-off sentiment. Citigroup’s World Government Bond Index excluding the US surged by 4.0% during February (unhedged US dollar total return). This strong performance also positions this subset of the fixed-income market at the top for the trailing one-year period, reflecting a 1.7% increase.
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● US pending home sales reach a one-year low | Reuters
● Chicago PMI indicates a contraction in factory activity for February | MarketWatch
● Dallas Fed Index: Manufacturing remains in contraction in Texas | 24/7 Wall St
● Eurozone jobless rate declines to 10.3% in January | Reuters
● PMI: Eurozone manufacturing growth slows to a 12-month low in February | Markit
● China’s manufacturing PMI signals continued sluggishness | MarketWatch
● Fed’s Dudley warns that US economic risks have heightened | Reuters
● Three reasons Warren Buffett remains optimistic about the US economy | CBS MW
Private nonfarm payrolls in the US are expected to rise by 197,000 (seasonally adjusted) in February compared to the previous month, based on The Capital Spectator’s average of several econometric estimates. This average projection reflects a moderate decrease from the increase seen in January.
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Implementing tactical asset allocation (TAA) can present several promising approaches for mitigating significant drawdowns that often affect buy-and-hold strategies. However, strategies that seem effective on paper may result in complications in practice. An easy solution, in this case, is to consider the total number of trades involved in a strategy as an additional risk dimension.
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During the last week of February, there was a sustained appetite for riskier assets, at least in select areas, as illustrated by a selection of proxy ETFs for major asset classes. US junk bonds led the way for the five trading days ending February 26, building on gains from the previous week. However, this resurgence did not extend to foreign assets from a US dollar perspective. Other than minor gains for foreign real estate securities and equities in developed markets, most losses affected offshore markets, particularly foreign bonds and emerging-market stocks.
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● US Personal Income and Spending Surpass Expectations in January | RTT
● US Q4 GDP Revised Upward Due to Inventory Adjustments | Bloomberg
● US Consumer Sentiment Declines Less Than Initially Estimated in February | RTT
● Eurozone CPI Inflation Turns Negative for Year-on-Year Headline Trend in February | Bloomberg
● German Retail Sales Increased More Than Expected in January | ShareCast
● Shares Decline Following G20 Disappointment and Fed Rate Hike Concerns | Reuters
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