Last month, US industrial production saw a slight decline, dropping by 0.1% in October, contrary to expectations of a modest increase. This decrease was primarily attributed to reduced output in mining and utilities. On a positive note, the manufacturing component demonstrated a growth of 0.3% in October, which is a noticeable uptick from September’s 0.1% rise. This improvement in the manufacturing sector suggests that the lower overall figure might not significantly impact the broader business cycle.
The question looms: how high will the US stock market continue to rise? As of yesterday’s closing, our ETF proxy for US equities (Vanguard Total Stock Market (VTI)) is nearing a remarkable 29% gain for the year, significantly outpacing the long-term annualized performance of this asset class. This situation serves as a reminder of the undeniable nature of momentum, at least in the short term. However, the challenge lies in recognizing when this positive momentum may shift to a more negative trajectory.
Initial jobless claims saw another decline last week, marking the fifth consecutive week of falling numbers. While this is encouraging, the pace of the decline is noticeably slowing. Whether this indicates an impending concern remains uncertain; nonetheless, it merits close observation. Today’s data offers a slightly optimistic perspective, as new unemployment filings continue to decrease, reinforcing the notion that the established downward trend may persist and that the labor market is on the mend.
The upcoming October report on US industrial production is anticipated to reflect a 0.2% increase from the previous month, according to The Capital Spectator’s average econometric forecast. This expected rise represents a notable deceleration compared to the growth seen in September’s industrial output. In fact, the Capital Spectator’s average estimate for October is slightly above projections from various economist surveys.
Is government spending spiraling out of control in Washington? The answer depends significantly on how one interprets the data. Numerous indicators can support various interpretations, but a more objective assessment is warranted. It is challenging to establish a singular, completely objective lens through which to evaluate Washington’s spending habits. However, an analysis based on multiple perspectives reveals a recent decline in spending trends. Whether this decline will persist remains uncertain and is contingent on political decisions, currently influenced by automatic budget cuts enacted into law. For now, let’s examine the latest numbers to gain insight into budgetary trends.
The US economy experienced slightly faster growth in September, as indicated by today’s delayed update from The Chicago Fed National Activity Index, which is a macroeconomic benchmark derived from 85 indicators. The three-month moving average, CFNAI-MA3, rose to –0.03 in September from –0.15 in August, marking its seventh consecutive reading below zero, according to the Chicago Fed. While the index remains marginally below trend, its current -0.03 figure represents the highest level since February. This indicates that economic growth, although moderate, does not show immediate signs of deterioration, as suggested by the September data.
Restoring Value to Minimum Variance
Lisa R. Goldberg (University of Calif., Aperio Group), et al. | Oct. 2013
A long-only investable minimum variance strategy outperformed the S&P 500 over the four decades from January 1973 to December 2012. Through a factor model perspective, we show that much of this outperformance can be attributed to implicit style bets. Specifically, minimum variance has achieved success by shifting focus away from size and volatility towards value. In the wake of the financial crisis, as funds have increasingly flowed into minimum variance strategies, the value tilt has diminished, and a momentum tilt has emerged. This implies that entering the minimum variance strategy is now more expensive. We outline methods to restore the value tilt in minimum variance by targeting specific exposures, emphasizing that significant long-term benefits can arise from this restoration at the latest entry points.
The inflation-adjusted year-over-year growth rate of so-called high-powered money—M0, as it is sometimes referred to—is experiencing its fastest increase since 2009, when the Federal Reserve was tapering its initial monetary responses to the Great Recession. This acceleration in base money growth, a component of the money supply that the Federal Reserve directly manages, coincides with a new wave of discussions regarding the imminent tapering of the central bank’s asset-buying program, spurred by recent positive economic reports. Some analysts are forecasting a potential tapering announcement as early as next month during the next FOMC policy meeting. However, a recent Bloomberg survey indicates that many economists anticipate that March 2014 will be the more likely date for policy changes. Meanwhile, the latest base money data shows no indications of tapering, suggesting that monetary policy may be becoming even more accommodative based on current figures.
Recession risks remain low, based on the revised projection for the three-month average of the Chicago Fed National Activity Index (CFNAI). This key business cycle indicator is expected to show a slight increase to -0.14 in tomorrow’s updated report for September, according to The Capital Spectator’s average econometric forecast. Today’s revised estimate takes into account new data released after the conclusion of last month’s government shutdown, although the overall expectation remains largely consistent with the previous forecast for tomorrow’s September update.
● White-Collar Government: The Hidden Role of Class in Economic Policy Making
By Nicholas Carnes
Essay by the author via NewsObserver.com
A significant majority of our lawmakers, regardless of party affiliation, hail from the wealthiest segments of American society. If Barack Obama, John Boehner, Nancy Pelosi, Harry Reid, and Mitch McConnell convened a discussion on resolving the budget impasse, not one among them would possess a net worth under $1.7 million.
Moreover, while blue-collar jobs, including manual labor and service industry roles, dominate the labor market, individuals from these backgrounds comprise less than 2 percent of Congress. Conversely, millionaires—who represent less than 5 percent of the population—exercise control over all three branches of the federal government, holding a majority in the House, a filibuster-proof supermajority in the Senate, a 5-4 majority on the Supreme Court, and the presidency.
