The Capital Spectator: Insights on Investing, Asset Allocation, and Economics

In recent weeks, several key economic indicators have emerged, shedding light on the current state of the U.S. and global economies. Here’s a snapshot of important reports:

• ● U.S. Automakers experienced an uptick in sales during April | RTT
• ● The U.S. ISM Manufacturing Index remained unchanged in April, but hiring showed a negative trend | MarketWatch
• ● Consumer Sentiment in the U.S. has reached its second-highest level since 2007 | Bloomberg
• ● U.S. construction spending fell to a six-month low in March | Reuters
• ● Eurozone sentiment has slightly declined in May according to Sentix report | Reuters
• ● Eurozone manufacturing growth continued in April, according to PMI | Markit
• ● China’s manufacturing conditions are deteriorating at the fastest rate in a year | Markit
• ● In Germany, manufacturing output and new orders have increased, albeit at a slower rate | Markit
• ● The French manufacturing sector remains entrenched in contraction as of April | Markit
• ● PMI data indicates that Italy’s manufacturing sector is experiencing its fastest growth in a year | Markit
• ● Spain’s manufacturing sector is witnessing accelerated growth in new orders | Markit

Please be informed that the returns for the Global Market Index (GMI) and its rebalanced version (GMI-R) were misrepresented in Friday’s monthly update for April 2015. The actual returns are somewhat lower than previously indicated. Corrected performance data for both GMI and GMI-R can be found below. We apologize for any confusion this may have caused.
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● Pedigree: How Elite Students Get Elite Jobs
By Lauren A. Rivera
Summary via publisher (Princeton University Press)
In a society that preaches upward mobility as an achievable goal for anyone willing to put in the effort, the reality often differs for those hailing from affluent backgrounds, who typically secure the best employment opportunities. In “Pedigree,” readers gain insight into the hidden dynamics of hiring practices at elite investment banks, consulting firms, and law offices, unveiling who gets the nation’s most lucrative entry-level positions, who does not, and the reasons behind these outcomes.
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Correction: The returns for the Global Market Index (GMI) and its rebalanced version (GMI-R) were inaccurately reported in a previous update for April 2015. The actual returns are slightly lower than indicated. The corrected performance data for both GMI and GMI-R is detailed in the table below. Corrections have also been made to references regarding GMI’s monthly return in the text. We apologize for the oversight.
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● Consumer Spending Concludes a Lackluster U.S. Quarter on an Upswing | Bloomberg
● U.S. Personal Income Remains Stagnant in March | Business Insider
● U.S. Jobless Claims Drop to Their Lowest Level in 15 Years | WSJ
● Labor Costs in the U.S. Have Increased, with Notable Wage Growth | Reuters
● The Consumer Comfort Index in the U.S. Has Fallen to Its Lowest Rate in Six Weeks | Bloomberg
● PMI Reports a Slowdown in UK Manufacturing Growth Unexpectedly in April | RTT

The ISM Manufacturing Index is anticipated to decline to 50.9 in tomorrow’s update (May 1) for April, compared to the prior month, based on The Capital Spectator’s median forecast derived from various econometric estimates. This prediction, while below the neutral threshold of 50.0, indicates that the outlook remains in a phase of mild growth for this key measure of economic activity within the U.S. manufacturing sector.
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Recent data indicates that consumer spending surged last month, while disposable personal income (DPI) remained stagnant in March, according to a report released today by the U.S. Bureau of Economic Analysis. Furthermore, the Labor Department noted that initial jobless claims dropped significantly, reaching a 15-year low, which bodes well for next week’s monthly payroll update for April. However, the data reveals that the first quarter concluded with mixed outcomes.
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The U.S. economy experienced stagnant growth in the first quarter, raising concerns about the overall macroeconomic perspective. Despite a slight gain of 0.2% in GDP during the initial three months of this year, the Federal Reserve chooses to highlight the positives. They attribute the lackluster Q1 performance to “transitory factors.” In the latest FOMC statement, the Fed noted that while growth in both output and employment slowed in the first quarter, they remain optimistic with expectations of moderate economic expansion, provided appropriate policy support is implemented.
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● Analysts Adjust Q2 U.S. GDP Forecasts Following Weak Q1 Results | Bloomberg
● The Fed Projects a Rebound in the U.S. Economy Following Q1 Slump | Bloomberg
● U.S. Pending Home Sales Reach a Near Two-Year High in March | RTT
● U.S. Oil Prices Hit Five-Month High Amid a Weakening Dollar | Reuters
● Eurozone Emerges from Deflation with Prices Stabilizing | Reuters
● Eurozone Lending Rebounds After Three Consecutive Years of Decline | Reuters
● German Unemployment Drops to a 24-Year Low in April | RTE
● Retail Sales in Germany For March Mark the Largest Decline Since December 2013 | Reuters
● Japan’s Industrial Output in March Registered a Decline, Yet Outperformed Expectations | CNBC

The U.S. economy grew by a mere 0.2% in the first quarter compared to the previous three-month period (seasonally adjusted annualized rate), as reported by the Bureau of Economic Analysis . This modest gain falls significantly short of consensus expectations (and The Capital Spectator’s median estimate). Although the majority of key components in today’s release struggled, there was one notable exception: disposable personal income (DPI), which exhibited robust growth in Q1 compared to last year’s final quarter.
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