As the much-anticipated Labor Day weekend approaches in the United States, a familiar tradition is unfolding at The Capital Spectator’s headquarters: a 120-hour coffee break for all employees. The regular work schedule will resume next week, specifically on Tuesday, September 2, when the team returns to their digital tasks. In the meantime, a toast to all hardworking individuals out there… Cheers!
The upcoming report on US personal consumption spending for July is anticipated to reveal a 0.3% increase compared to the previous month, according to The Capital Spectator’s median econometric forecast. This represents a slight slowdown from June’s 0.4% rise.
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In response to John Rekenthaler’s recent article, which posed the provocative question of whether active funds have a future, Morningstar faced considerable backlash from its readership. Rekenthaler’s succinct conclusion: “Apparently not much.” As expected, active management supporters voiced their discontent, prompting Rekenthaler, a respected analyst at Morningstar, to issue a somewhat apologetic follow-up. He stated, “Rather than juxtaposing active and passive funds, I should differentiate between those that deserve recognition and those that do not. I concur.”
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For the first time, the S&P 500 traded briefly above 2000 yesterday. This all-time high led some analysts to declare, not for the first time, that the stock market is entering bubble territory. However, the ongoing bull market can be attributed to economic growth. While there are debates regarding the sustainability and authenticity of this growth—some attribute it to central bank liquidity—the focus remains on current economic conditions and the market’s response to them.
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The remarkable rebound in second-quarter GDP growth is expected to face a considerable slowdown in the third quarter, according to The Capital Spectator’s median econometric nowcast. The US economy is projected to grow at an annual rate of 2.5% (real seasonally adjusted) from July to September, a decline from the 4.0% rate reported by the Bureau of Economic Analysis (BEA) for Q2.
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● Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations
By Tobias E. Carlisle
Summary via publisher, Wiley
“Deep Value” delves into the intriguing world of deep value investment strategies, discussing the shift in valuation theories and shareholder activism from Graham to Icahn and beyond. Combining compelling anecdotes with industry insights, the book articulates the principles and methodologies of this intricate strategy, elucidating the reasoning behind seemingly perplexing activist maneuvers. As an active value investor, the author offers an insider’s perspective that caters to both professionals and casual readers alike. Initially, the Deep Value philosophy, as articulated by Graham, targeted companies based on their liquidation value. However, with fewer opportunities available in today’s market, activists have had to evolve their approaches.
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According to The Capital Spectator’s median econometric forecast, the three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to show a slight decline to +0.09 in Monday’s update for July. This figure is a marginal decrease from June’s reading of +0.13, indicating above-average economic growth relative to historical trends. Values below -0.70 suggest an “increasing likelihood” of an impending recession, per the guidelines from the Chicago Fed. Based on the current estimate for July, CFNAI’s three-month average is projected to remain at levels historically aligned with growth that exceeds the trend.
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This week’s positive data regarding the housing market has reignited claims that the Federal Reserve “is clearly behind the curve.” Economist Scott Grannis suggests that it’s “great news” as he anticipates the Fed will raise rates sooner rather than later. He elaborates that “nominal GDP has experienced growth of about 4% for most of the past four years, while the Fed has maintained excessively low short-term rates. This situation is unsustainable.”
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Today’s weekly update on new unemployment filings serves as a reminder of the current strength of the US labor market. Jobless claims have dropped by 14,000 last week to a seasonally adjusted 298,000—just shy of the post-recession low of 279,000 reached last month. More significantly, the longer-term trend remains promising. Although the short-term volatility of this data can be perplexing, the overarching narrative is clear: layoffs have been steadily declining. Today’s report reaffirms this ongoing trend.
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The search for impending recessions can be an obsession for some analysts, with every minor update or unfavorable report becoming fodder for predictions of trouble ahead. However, repeatedly sounding the alarm has proven unproductive over the years, and current data does not suggest that the near future will provide any different scenario. The macroeconomic indicators for the US continue to improve, as reflected in the July updates of a diverse set of 14 economic and financial metrics. In fact, projections for the coming months indicate an ongoing positive trend.
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