In July, the construction of new residential housing experienced a significant resurgence. While analysts had anticipated a rebound, the actual figures greatly surpassed expectations. Housing starts climbed to an annualized rate of 1.093 million last month, considerably higher than the revised 945,000 rate observed in June. Additionally, the number of newly issued building permits showed robust improvement in July. In summary, the worst-case scenarios for the housing industry have diminished, as confirmed by the latest release from the US Census Bureau.
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Choosing the right active managers has never been an easy task, but ongoing advancements in R packages are making the process smoother. One crucial method is factor analysis, a statistical approach that helps identify the sources of risk and returns within a portfolio. This analytical tool counters the marketing exaggerations often found in the investment management sector. The premier method for evaluating equity portfolios involves regressing returns against the Fama-French dataset (FF), which is regularly updated at Professor Ken French’s website. Years ago, acquiring FF data and performing the analysis was a tedious task, as highlighted in this 2001 how-to article by Bill Bernstein. If you were skilled in spreadsheet analysis, you might have been able to dissect a fund’s history in about ten minutes. Fast forward to 13 years later, and factor analysis has become remarkably straightforward. With the R code provided below, we can download the necessary data and conduct the analysis for each fund in less than ten seconds.
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Phil DeMuth from Conservative Wealth Management, an author of several finance books including The Affluent Investor
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The 10-year Treasury yield fell below 2.35% last week, marking its lowest point in over a year. Similarly, oil prices have also softened, with West Texas Intermediate dipping into the mid-$90 range for the first time since early February. Some analysts are pointing to last week’s stagnant retail sales report for July as a warning sign that the US economy may be in trouble. A recent article in the New York Post raised concerns, suggesting, “During recessions and periods of weak growth, energy prices typically decline.”
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Housing starts are anticipated to reach 937,000 in tomorrow’s update for July, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). This projection reflects a modest increase compared to the previously reported 893,000 from June.
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The Capital Spectator will be taking a short break this afternoon for one last summer holiday, returning to regular programming on Monday, August 18. In the meantime, enjoy the rest of your week!
In recent years, a significant amount of research has emerged on the critical topic of identifying market bubbles in real time. Notably, a team of academics including Peter Phillips and Jun Yu have drawn attention for their valuable work. Last year’s paper “Testing for Multiple Bubbles 1: Historical Episodes of Exuberance and Collapse in the S&P 500” offers groundbreaking econometric testing methods and proposes an effective framework for detecting irrational exuberance in asset prices. As noted by Fulcrum Asset Management in their review of updated bubble analytics earlier this year: “Recent advancements in econometric methodologies enable us to identify explosive dynamics in asset prices.”
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According to The Capital Spectator’s median econometric forecast, US industrial production is expected to rise by 0.3% compared to the previous month in the Federal Reserve’s upcoming release on August 15. This forecast indicates a slightly accelerated growth rate than the previously reported 0.2% increase for June.
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For the upcoming July report, US retail sales are anticipated to increase by 0.2%, as per The Capital Spectator’s median econometric prediction. This forecast aligns with the previously recorded 0.2% gain for June.
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Concerns about risk surged last week amid a backdrop of increasing worries on both geopolitical and economic fronts. Nevertheless, the US stock market, while having retreated from its recent peaks, continues to exhibit significant strength in both absolute and relative terms. Positive economic developments in prior weeks have been a key factor behind this resilience. However, the macroeconomic landscape for the US will face new tests in the coming days with reports scheduled for retail sales (August 13) and industrial production (August 15). In the meantime, US equities maintain their leading position among the major asset classes, as evaluated based on the trailing 250 trading-day total return (a rough indicator of one-year performance) using our standard set of proxy ETFs.
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