The upcoming three-month average of the Chicago Fed National Activity Index (CFNAI) is anticipated to see a slight dip to -0.04 in the February update, set for release on Monday (March 24), as suggested by The Capital Spectator’s median econometric forecast. The previous January reading was +0.10, indicating economic expansion. According to the guidelines established by the Chicago Fed, only values falling below -0.70 signal an “increasing likelihood” of a recession. The projected February CFNAI average indicates a continued association with growth, albeit at a pace that is marginally below historical trends.
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Many investors mistakenly believe they can bypass asset allocation and its implications for shaping and managing their strategies. Reports in financial media often suggest that having a multi-asset-class portfolio is optional, if not altogether irrelevant, depending on the narrative. This misconception can be dangerously misleading. The allure of the financial world often tempts individuals to act creatively, but in reality, our focus should shift toward a more engineering-like approach.
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Today marks the first press conference for new Fed Chair Janet Yellen. Although she faces a complex array of monetary policy decisions in the coming years, she benefits from a key advantage that bolstered her predecessor’s tenure: a moderately favorable macroeconomic trend.
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Housing starts declined once more in February, dropping by 0.2% from January. This marks the third consecutive month of decline. While the rate of decrease is slowing, signaling some slight improvement, it is overshadowed by the worrying trend of a three-month drop in starts—the first such occurrence since 2009. Nonetheless, it may be premature to conclude the worst is upon us. A noticeable uptick in newly issued housing permits last month offers the hope of a potential rebound in the spring.
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The controversial vote in Crimea on Sunday to secede from Ukraine and join Russia led the US and Europe to impose targeted sanctions on select Russian officials. However, the markets seemed unfazed by the news. It appears that the risks associated with Russia’s annexation of Crimea, deemed illegal by the West, are already factored into asset prices. Though the immediate reaction has been calm, it would be unwise to assume that the situation is entirely settled. Eventually, one party will have to concede, but current indicators suggest little appetite for compromise, hinting at the possibility of a protracted standoff between East and West with underlying economic turmoil looming.
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The forecast for housing starts is set at 955,000 for February in tomorrow’s update, based on The Capital Spectator’s median econometric prediction (seasonally adjusted annual rate). This represents a significant rise from the previously reported figure of 880,000 for January. Notably, this projection exceeds three consensus estimates derived from recent economist surveys.
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Unexpectedly, industrial production surged last month, with output rising by 0.6% in February compared to the previous month, significantly surpassing predictions, including The Capital Spectator’s econometric forecast. While this positive news is welcome, its importance may diminish if the situation between Russia and Ukraine escalates following Crimea’s controversial vote to secede. However, for now, it’s prudent to celebrate the bounce in the industrial sector, even if future developments may rewrite the narrative amidst a potential resurgence of Cold War tensions.
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In a notable event, Crimea held a vote yesterday to rejoin Russia, prompting a strong reaction from the West, which has threatened sanctions against certain Russian officials, assets, and bank accounts. The form and impact of potential further sanctions remain speculative. Regardless of the specifics, the US and Europe cannot alter what appears to be a powerful desire among Crimeans to distance themselves from Ukraine. With Russia having deployed troops and made its intentions clear, a change in course seems unlikely. This development marks a significant geopolitical stalemate of our time.
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The Federal Reserve is expected to announce a 0.2% increase in industrial production for February in their upcoming report, as per The Capital Spectator’s median econometric forecast. This anticipated rise would mark a recovery from the 0.3% decline recorded in January. Additionally, the Capital Spectator’s forecast for February falls in line with the consensus from three recent surveys of economists.
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● The Tragedy of the European Union: Disintegration or Revival?
By George Soros
Summary via publisher, PublicAffairs
The future of the European Union hangs in the balance. With rising xenophobia making waves in elections, nations like Great Britain are contemplating leaving the union altogether. Driven by anti-EU sentiments stemming from the euro crisis, the conflicting national interests challenge the shared vision for Europe’s future. Is it too late to save the union that has maintained unprecedented peace for over fifty years? In insightful interviews with Dr. Gregor Peter Schmitz, George Soros, a seasoned observer of European affairs, offers candid reflections and practical insights: he argues that the euro crisis was not an unavoidable outcome of integration, but rather the result of missteps in political, economic, and financial arenas driven by misplaced belief in self-regulating markets that he labels as market fundamentalism, which has created institutional frameworks in dire need of reform.
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