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<p>In recent years, the close relationship between the Treasury market's inflation forecast and the stock market, particularly the S&P 500, has served as a significant indicator of macroeconomic conditions in what can be termed the "new abnormal." As I noted in a previous discussion, a typical correlation between equity market values and inflation expectations is minimal. Generally, heightened inflation above a certain threshold raises concerns, but this traditional view has shifted since the financial crisis of late 2008, aligning us with a new economic paradigm. As such, a decrease in inflation expectations tends to coincide with declining stock prices; if this trend continues, it could precipitate a decline in macroeconomic conditions. While this unsettling phase will eventually be resolved, we are not there yet. For a deeper understanding of this phenomenon, you can refer to David Glasner’s research on the Fisher effect. Keeping this in mind, let’s examine the latest stock market signals in light of inflation expectations and their broader implications for the economy.</p>
<p> <a href="https://www.capitalspectator.com/another-crossroads-for-the-new-abnormal/#more-2075" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/another-crossroads-for-the-new-abnormal/" title="4:39 am" rel="bookmark"><time class="entry-date" datetime="2012-01-30T04:39:35-05:00">January 30, 2012</time></a>
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<p>● <a href="http://www.amazon.com/gp/product/1451646194/ref=as_li_tf_tl?ie=UTF8&tag=thecapitalspe-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=1451646194">The Benefit and The Burden: Tax Reform-Why We Need It and What It Will Take</a><img decoding="async" src="http://www.assoc-amazon.com/e/ir?t=thecapitalspe-20&l=as2&o=1&a=1451646194" width="1" height="1" border="0" alt="" style="border:none !important; margin:0px !important;"/><br/>By Bruce Bartlett<br/><a href="http://www.ft.com/cms/s/2/4b805a8e-37c2-11e1-9fb0-00144feabdc0.html#axzz1jhtphRAX"><strong>Review</strong></a> via The Financial Times<br/>The current state of America’s tax system is fraught with difficulties. It is characterized by its unfairness, complexity, and numerous loopholes. This system struggles to generate the revenues necessary to address the looming debt crisis and meet the future demands of an aging population. After more than 25 years without substantial reform, a comprehensive overhaul is desperately needed. In *The Benefit and the Burden*, Bruce Bartlett, an economist with a rich background in governmental roles, underscores the urgency for tax reform as a means to stabilize U.S. finances. He argues that any increase in tax revenue must be accompanied by a better public understanding of the tax system to make the burdens more manageable.</p>
<p> <a href="https://www.capitalspectator.com/book-bits-for-saturday-1-28-2012/#more-2074" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/book-bits-for-saturday-1-28-2012/" title="5:07 am" rel="bookmark"><time class="entry-date" datetime="2012-01-28T05:07:19-05:00">January 28, 2012</time></a>
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<p>Another retrospective economic report has sparked a fresh wave of optimism, suggesting that a new recession may not be imminent. The U.S. economy grew at an annual real rate of 2.8% in the fourth quarter of last year, according to data from the Bureau of Economic Analysis. This represents a notable improvement from the sluggish 1.8% growth we saw in the third quarter. While this figure fell short of the anticipated 3.1% rise, it is important to recognize that Q4's growth was the fastest since the second quarter of 2010. It may be fair to say we are slowly but surely making progress.</p>
<p> <a href="https://www.capitalspectator.com/us-economic-growth-accelerates-modestly-in-fourth-quarter/#more-2073" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/us-economic-growth-accelerates-modestly-in-fourth-quarter/" title="9:59 am" rel="bookmark"><time class="entry-date" datetime="2012-01-27T09:59:17-05:00">January 27, 2012</time></a>
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<p>The recent increase in the <a href="http://www.chicagofed.org/webpages/publications/cfnai/index.cfm">Chicago Fed National Activity Index (CFNAI)</a> presents another data point worth considering in the ongoing discourse about recession risks. While historical data may not predict future trends, December’s economic momentum appears to have strengthened. The outlook for January and beyond, however, remains uncertain.</p>
<p> <a href="https://www.capitalspectator.com/december-economic-activity-improved-chicago-fed-reports/#more-2072" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/december-economic-activity-improved-chicago-fed-reports/" title="6:23 am" rel="bookmark"><time class="entry-date" datetime="2012-01-27T06:23:26-05:00">January 27, 2012</time></a>
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<p><a href="http://www.dol.gov/opa/media/press/eta/ui/eta20120124.htm">Initial jobless claims</a> saw an increase last week, coinciding with a rise in <a href="http://www.census.gov/manufacturing/m3">new durable goods orders for December</a>. This presents a mixed bag of information, but further analysis indicates that the economy's growth potential remains robust.</p>
<p> <a href="https://www.capitalspectator.com/mixed-message-jobless-claims-durable-goods-orders-rise/#more-2071" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/mixed-message-jobless-claims-durable-goods-orders-rise/" title="10:15 am" rel="bookmark"><time class="entry-date" datetime="2012-01-26T10:15:40-05:00">January 26, 2012</time></a>
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<p>Sometimes, visual representations can convey information more powerfully than words alone. A graph illustrating 222 years of U.S. long-term interest rate history might not yield actionable insights, but it certainly provides fascinating context. If you're looking for perspective, this is it. Special thanks to <a href="http://www.ritholtz.com/blog/2012/01/222-years-of-long-term-interest-rates/">Barry Ritholtz at The Big Picture</a> and Bianco Research for this compelling data exploration. The key takeaway is that we are currently at historically low levels for long-term bonds, a reality that compels reflection.</p>
<p> <a href="https://www.capitalspectator.com/the-long-long-term-view-of-interest-rates/#more-2070" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/the-long-long-term-view-of-interest-rates/" title="8:29 pm" rel="bookmark"><time class="entry-date" datetime="2012-01-25T20:29:31-05:00">January 25, 2012</time></a>
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<p>Last week, I <a href="https://www.capitalspectator.com/wp-content/uploads/wp-content/uploads/2012/01/xxxx.html#more">updated</a> the Global Market Index’s (GMI) performance scorecard in relation to actively managed asset allocation products. Now it’s time to look ahead and consider future developments.</p>
<p> <a href="https://www.capitalspectator.com/estimating-gmis-ex-ante-risk-premium/#more-2069" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/estimating-gmis-ex-ante-risk-premium/" title="12:18 pm" rel="bookmark"><time class="entry-date" datetime="2012-01-25T12:18:37-05:00">January 25, 2012</time></a>
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<p>The International Monetary Fund's revised outlook for global economic growth raises considerations about potential recession risks in the U.S. However, the latest forecasts from the IMF for U.S. GDP remain stable.</p>
<p> <a href="https://www.capitalspectator.com/the-imf-downgrades-global-growth-but-sees-no-fallout-for-the-us/#more-2068" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/the-imf-downgrades-global-growth-but-sees-no-fallout-for-the-us/" title="6:37 am" rel="bookmark"><time class="entry-date" datetime="2012-01-25T06:37:29-05:00">January 25, 2012</time></a>
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<p>The economic profile for the U.S. in December is nearly complete, and current data appears to be moderately encouraging. While it’s not a flawless report, and we await further crucial numbers, the information released thus far indicates that growth was predominant in the final month of 2011.</p>
<p> <a href="https://www.capitalspectator.com/will-decembers-economic-momentum-survive-the-months-final-updates/#more-2067" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/will-decembers-economic-momentum-survive-the-months-final-updates/" title="10:14 am" rel="bookmark"><time class="entry-date" datetime="2012-01-24T10:14:13-05:00">January 24, 2012</time></a>
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<p>The year has started positively for riskier assets. While year-to-date returns may not carry significant weight at this early stage, the strong start offers a hopeful outlook. However, market participants often find reasons for concern, and the current trend shows surprising stability. U.S. stocks appear robust from a technical standpoint, continuing the rally that began in mid-December. Foreign equities are on a similar trajectory. Amid a growing appetite for risk, investment-grade bonds are experiencing declines, primarily due to a reduction in Treasury investments. Conversely, foreign bonds are performing better in U.S. dollar terms, partly due to the recent weakness of the dollar. Overall, commodities have maintained a steady state, although gold is showing signs of a resurgence. After a brief pause, real estate investment trusts are also gaining traction. The future of these trends will largely depend on forthcoming economic data. While a recession seems inevitable in Europe, the prevailing consensus is more optimistic for the U.S. Below is how major asset classes are positioned, illustrated through our usual ETF proxies...</p>
<p> <a href="https://www.capitalspectator.com/tactical-etf-review-1-24-2012/#more-2066" class="more-link">Continue reading <span class="meta-nav">→</span></a> </p>
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By James Picerno | <a href="https://www.capitalspectator.com/tactical-etf-review-1-24-2012/" title="5:23 am" rel="bookmark"><time class="entry-date" datetime="2012-01-24T05:23:27-05:00">January 24, 2012</time></a>
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