Recent developments regarding jobless claims may appear alarming at first glance, but it is wise to approach such news with caution. Not long ago, new unemployment benefit filings plunged to their lowest point in four years. However, analysts cautioned that this unexpected drop may have been influenced by seasonal patterns, particularly the summer shutdowns of automobile factories. Fast forward to the latest figures for the week ending July 14, and they reveal little change from late June’s data. This suggests that the fluctuations observed in the prior weeks may have been largely noise rather than a clear signal of economic distress.
Today’s report on housing starts and new construction permits for June brings another piece of promising economic news. This follows yesterday’s positive update on industrial production for the same month. While June’s overall economic indicators present a mixed picture—evident in disappointing retail sales, the ISM Manufacturing Index, and payroll numbers—it is significant that the housing market shows signs of continued growth, a trend supported by today’s data on permits and starts.
Many of the economic updates for June have been disheartening, with retail sales, the ISM Manufacturing Index, and payrolls presenting less than favorable results. Yet, today’s report on industrial production offers a much-needed glimmer of hope. According to the Federal Reserve, industrial output rose by 0.4% in June, a rebound from the previous month’s decline of 0.2%. Furthermore, the year-over-year change has improved to 4.7%, compared to 4.4% in May. Although this uptick in industrial production does not erase concerns stemming from other disappointing data, it does leave the discussion open regarding the future direction of the economy.
Unexpectedly, retail sales declined by 0.5% last month, according to new data from the Census Bureau. Economic predictions had generally anticipated an increase. This revised figure indicates that June’s drop marks the third consecutive monthly decline in retail sales, a trend not seen since 2008. While this is concerning, it should not be viewed as an absolute indicator of economic failure.
In light of recent discussions about potential recessions, there is considerable debate surrounding the importance of accurately predicting these economic downturns. Some argue that unless one can foresee recessions well in advance, the situation is dire. However, this perspective overlooks the complexity of economic cycles. Different recessions can have varying impacts over different timelines. Thus, even recognizing the onset of a recession early on can present valuable opportunities.
● Affluence and Influence: Economic Inequality and Political Power in America
By Martin Gilens
Summary via publisher, Princeton University Press
Can a country be a democracy if its government only responds to the preferences of the rich? In an ideal democracy, all citizens should have equal influence on government policy—however, as this book suggests, U.S. policymakers often cater primarily to the interests of the economically privileged. “Affluence and Influence” explores how political inequality has developed in America over the years, deeply influenced by interest groups, political parties, and elections. With incisive analysis and a wide array of data, Martin Gilens evaluates thousands of proposed policy changes and highlights the stark contrast in response to the needs of low-income versus affluent Americans.
Earlier this week, I examined how the Global Market Index’s risk premium evolved historically compared to future projections. Today, I will apply similar analyses to specific asset classes to provide further context.
Just yesterday, I analyzed various economic and market indicators and concluded that the case for anticipating an impending recession remains weak. The latest update on initial jobless claims reinforces this viewpoint: new claims decreased significantly by 26,000 last week, landing at a seasonally adjusted 350,000, marking a new four-year low. On the surface, this appears to be excellent news. However, the reality may be less straightforward, as the sharp decline is largely affected by significant seasonal adjustments from regular July factory shutdowns.
Lakshman Achuthan from the Economic Cycle Research Institute (ECRI) recently claimed that the U.S. is currently in a recession. In a discussion on Bloomberg TV, he stated, “I think we’re in recession already.” While he could be correct, confirming this assertion requires further data. The latest complete economic figures from May trend toward growth. June’s insights—from payrolls and the ISM Manufacturing Index—are not particularly promising, yet these indicators alone do not definitively prove that a recession is underway. The informative nature of the upcoming July reports will provide more clarity as they emerge in the following weeks.
The Global Market Index (GMI), which serves as a benchmark for a variety of asset classes, has demonstrated a consistent ability to yield competitive returns against actively managed portfolios over the past decade. This may come as a surprise, but it underscores the challenge of outperforming the market. While a few talented portfolio managers might achieve notable success in multi-asset class investing, it is a mistake to assume that such outcomes are common or predictable. Historical trends suggest otherwise. For this reason, a broadly defined strategy like GMI is a prized benchmark. As an impartial measure of returns and risks across global investment opportunities, GMI offers valuable insights to investors, enabling them to replicate its success at a minimal cost through index ETFs.
