In the upcoming report for January, U.S. retail sales are projected to increase by 0.2% compared to the previous month, according to the median econometric forecast from The Capital Spectator. This estimation is consistent with the 0.2% rise reported for December. Notably, the forecast for January surpasses several consensus estimates derived from recent economist surveys.
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Recent trends in major asset class returns offer a fascinating contrast for investors. This variation serves as a live examination of behavioral economics in action. With such disparities in trailing returns, there’s an opportunity for rebalancing—at least in theory. However, investors often grapple with the wisdom of reducing their stakes in high-performing assets while increasing investments in weaker areas. The allure of attractive return spreads can be tempting on paper, yet the psychological barriers of portfolio rebalancing can be daunting. After all, it’s challenging to invest in assets during market downturns. The core question remains: Does mean reversion still hold true? The decision-making process surrounding the timing and method of rebalancing is complex and rarely straightforward. Ultimately, though, it remains essential for managing a multi-asset class portfolio, even if it carries inherent risks.
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The U.S. economy is anticipated to grow by 2.6% in the first quarter of this year, based on The Capital Spectator’s median econometric nowcast. This initial estimate is derived from limited Q1 data and will be updated multiple times as new economic indicators become available and existing data undergo revisions. The final nowcast for this quarter will be released shortly before the official Q1:2014 GDP report, scheduled by the U.S. Bureau of Economic Analysis (BEA) for April 30, 2014.
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● The Affluent Society Revisited
By Mike Berry
Summary via publisher, Oxford University Press
This book revisits John Kenneth Galbraith’s seminal work, The Affluent Society, examining its relevance amidst the backdrop of the 2008 global economic crisis. Each chapter elaborates on a major theme from Galbraith’s text, discusses its implications on current events in both developed economies and the broader economics field. Key themes include: inequality, insecurity, inflation, debt, consumer behavior, financialization, the role of government, the influence of ideas, power dynamics in the economy, and the essence of a prosperous society. It also addresses the contemporary challenges faced by capitalism and the significant hurdles that democratic governments confront in addressing these issues.
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In January, private nonfarm payrolls showed a recovery following December’s modest increase, but the rebound fell short of expectations. Inclement weather is once again cited as a potential factor disrupting job growth. The data indicated that private-sector employment grew by only 142,000 in January, a figure that is only marginally better than December’s disappointing 87,000 increase.
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According to The Capital Spectator’s median econometric forecast, private nonfarm payrolls in the U.S. are expected to rise by 173,000 in the upcoming January report from the Labor Department. This projected increase is approximately double the previously reported growth of 87,000 for December. The January forecast aligns closely with a set of consensus forecasts based on economist surveys.
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Last week’s jobless claims decreased by 20,000, bringing the seasonally adjusted total to 331,000. This significant decline resulted in an 8.3% decrease compared to the same week last year. However, new claims have been fluctuating within a range of approximately 300,000 to 350,000 so far this year. The unusually cold weather may be contributing to the weaker job market lately, but further data will clarify this hypothesis in the coming weeks. Despite some mild optimism in the latest claims report, the overall trend is uncertain and requires careful observation.
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Marketwatch.com recently observed that “bonds are suddenly the hot investment.” Similarly, Barron’s highlighted a surge in bond prices, contradicting typical expectations within the market. However, labeling the bond market as “hot” largely depends on how one defines the asset class and the specific time frame evaluated.
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According to this morning’s ADP Employment Report, private payrolls increased by 175,000 last month, a decrease from December’s gain of 227,000. This figure aligns with economists’ consensus forecasts but falls short of The Capital Spectator’s median econometric prediction. Interestingly, today’s ADP result matched one of the models contributing to the CS median forecast. In future discussions, I will delve into the potential of using triangular distributions for enhanced forecasting accuracy. For now, let’s focus on the ADP findings.
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Recently, there has been a decline in stock prices alongside a mild retreat in inflation expectations, as evidenced by the spread between the nominal 10-year Treasury yield and its inflation-indexed equivalent. This correlation deserves careful consideration. While a weak stock market is concerning, a further decline in inflation expectations coupled with lower stock values raises significant economic worries.
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