In tomorrow’s industrial production report for January, expected at 08:30 AM Eastern, analysts project a modest increase of 0.2%, according to The Capital Spectator’s econometric average. This growth rate is slightly lower than the previous month’s gain of 0.3%. Experts generally forecast a rise of 0.2%-0.3% for December’s industrial production based on consensus estimates.
Last week’s jobless benefit applications saw a significant decline of 27,000, bringing the total to a seasonally adjusted 341,000—slightly above the five-year low of 330,000 recorded in the week ending January 19, 2013. Given the inherent volatility of these figures, it’s wise to avoid overanalyzing this specific number. Nonetheless, this recent decrease aligns with the ongoing trend indicating a slow but steady recovery in the labor market.
As anticipated, retail sales in January managed to increase by a seasonally adjusted 0.1% compared to the previous month, as reported by the Census Bureau. While the uptick is modest—likely impacted by rising tax rates at the start of the new year—it still suggests that consumer spending has maintained its momentum after two months of solid gains.
Tomorrow’s retail sales report for January is expected to indicate a 0.2% increase for the month, according to The Capital Spectator’s average econometric projection. This expectation slightly exceeds several economists’ consensus forecasts. It is important to note that January projections are consistently lower than the 0.5% gain reported by the Census Bureau last month.
Could the drought for large-cap value risk premium in the US stock market be coming to an end? Analyzing recent trends suggests a cautious affirmation, particularly when looking at the rolling two-year cumulative performance spread between the Russell 1000 Value Index and the Russell 1000 Growth Index.
The media is dubbing it the “great rotation”—the shift from bonds to stocks in 2013. While this trend has garnered considerable attention, there are cautionary notes regarding its sustainability. Nevertheless, the momentum favoring equities is undeniably clear thus far in 2013. Our analysis of ETF proxies for major asset classes indicates strong gains for stocks, with varying levels of performance for bonds. It’s worth noting that developed markets have recently experienced significant gains, while emerging market equities are slightly declining in US dollar terms as of February 8.
● The Great Convergence: Asia, the West, and the Logic of One World
By Kishore Mahbubani
Summary via publisher, Public Affairs
The twenty-first century has witnessed the emergence of a global middle class that fosters an unprecedented convergence of interests, perceptions, cultures, and values. Kishore Mahbubani expresses optimism, suggesting that we are building a new global civilization where eighty-eight percent of the global population outside the West is aspiring to Western living standards and values. However, he also cautions that this new global order necessitates updated policies and mindsets.
Sell Side Recommendations during Booms and Busts
Dieter Hess (University of Cologne), et al. | January 2013
This study reveals that the information content and processing of stock recommendations vary significantly between economic expansions and recessions. The initial market reaction to recommendations is more pronounced during recessions; however, “Buy” recommendations lack long-term investment value. The findings suggest that sell-side analysts tend to be overly optimistic about stocks during recessions, leading to overreactions from investors. In contrast, no such contradiction is observed during periods of economic growth. Additionally, analysts appear to favor “glamour” over “value” stocks across different economic conditions.
The latest update on weekly jobless claims continues to signal growth in the labor market, albeit at a modest pace. This trend seems likely to continue in the near term. According to the Labor Department, new applications for unemployment benefits decreased by 5,000 last week to a seasonally adjusted total of 366,000. New claims are now approaching pre-recession levels. Coupled with this week’s positive data from the ISM Manufacturing and Non-Manufacturing indices for January, this report supports the perspective that 2013 is starting off positively. More comprehensive insights will emerge once all January figures are released, but preliminary indicators suggest a hopeful outlook.
What factors are driving the stock market’s fluctuations? While numerous theories exist, a notable one in recent years is the so-called “new abnormal.” This phenomenon describes the positive correlation between the stock market and anticipated inflation, as indicated by the yield spread between the 10-year Treasury Note and its inflation-indexed variant. Historically, heightened inflation hasn’t been particularly favorable for equity markets. However, this relationship has transformed dramatically in recent years. Following the Great Recession, expectations for higher (or lower) inflation have been closely linked to rising (or falling) stock prices. Though this unusual trend may not persist indefinitely, the current data underscores its dominance for now.
In summary, recent economic reports reflect ongoing developments across various sectors, from industrial production to labor market recovery and retail sales. These trends suggest that despite some slowdown, there remains a foundation for cautious optimism. As we continue to analyze upcoming data and trends, the insights gathered will help shape our understanding of the economic landscape going forward.