The Capital Spectator: Investing, Asset Allocation, and Economics Insights

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    <p>As we evaluate the performance of the <a href="https://www.capitalspectator.com/major-asset-classes-december-2023-performance-review/">major asset classes</a> in 2023, we find a notable array of winners, yet one prominent exception remains: commodities. In a year that celebrated widespread growth across global markets, the losses in raw materials are particularly striking. Could this set the stage for a significant recovery in 2024?</p>

    <p> <a href="https://www.capitalspectator.com/commodities-are-still-an-intriguing-contrarian-trade/#more-21448" 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/commodities-are-still-an-intriguing-contrarian-trade/" title="8:03 am" rel="bookmark"><time class="entry-date" datetime="2024-01-16T08:03:36-05:00">January 16, 2024</time></a>
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    <p>* Trump <a href="https://thehill.com/homenews/campaign/4410571-winners-and-losers-of-the-iowa-caucuses/">achieves a significant victory</a> in the Iowa caucus, the first Republican vote of the 2024 election cycle<br/>* Houthi rebels <a href="https://apnews.com/article/houthis-us-yemen-israel-palestinians-gaza-fa2aefc86ae002e73081e6ac1b772610">continue</a> to strike shipping routes in the Red Sea<br/>* Iran <a href="https://www.cnn.com/2024/01/16/middleeast/iran-missiles-kurdistan-syria-israel-intl-hnk/index.html">conducts</a> missile strikes on northern Iraq and Syria<br/>* The Taiwan election <a href="https://www.axios.com/2024/01/14/china-taiwan-elections-military-political-biden">heightens fears</a> of escalating tensions with China<br/>* The US economy <a href="https://finance.yahoo.com/news/us-economy-set-another-cash-140000830.html">prepares</a> for potential additional stimulus pending congressional approval of a tax deal<br/>* <a href="https://www.wsj.com/politics/policy/6-trillion-in-taxes-are-at-stake-in-this-years-elections-ee4353ed?mod=economy_lead_story">Tax cuts</a> worth trillions are at stake in this year's elections<br/>* Progress in combating inflation is expected to slow, <a href="https://www.ft.com/content/e49e06a8-d087-4beb-98b1-9b774c09f50a">according to</a> the Atlanta Fed's president<br/>* US producer prices <a href="https://www.rttnews.com/3416511/u-s-producer-prices-unexpectedly-edge-slightly-lower-in-december.aspx">decline</a> for the third consecutive month in December:</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/ppi.15jan2024-1.png"><img fetchpriority="high" decoding="async" class="alignnone size-full wp-image-21443" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/ppi.15jan2024-1.png" alt="" width="700" height="500"  /></a></p>
    <p> <a href="https://www.capitalspectator.com/macro-briefing-16-january-2024/#more-21441" 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/macro-briefing-16-january-2024/" title="6:34 am" rel="bookmark"><time class="entry-date" datetime="2024-01-16T06:34:36-05:00">January 16, 2024</time></a>
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    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/mlk.15jan2024.png"><img decoding="async" class="wp-image-21446 alignleft" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/mlk.15jan2024.png" alt="" width="208" height="257"  /></a>“True peace is not merely the absence of tension; it is the presence of justice.”<br/><em>— Martin Luther King, Jr.</em></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/martin-luther-king-jr-day-15-january-2024/" title="7:38 am" rel="bookmark"><time class="entry-date" datetime="2024-01-15T07:38:36-05:00">January 15, 2024</time></a>
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    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/esg.12jan2024.png"><img decoding="async" class="wp-image-21440 alignleft" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/esg.12jan2024.png" alt="" width="203" height="334"  /></a>● <a href="https://amzn.to/3O2FiOW">Beyond the ESG Portfolio: How Wall Street Can Help Democracies Survive</a><br/>Marcos Buscaglia<br/><strong><a href="https://www.mhprofessional.com/beyond-the-esg-portfolio-how-wall-street-can-help-democracies-survive-9781265115609-usa#tab-label-product-description-title">Summary</a> via publisher (McGraw Hill)</strong><br/>Learn how to ensure that your ESG investments align with your clients' needs while considering the implications for democracy. Often unwittingly, investors may finance authoritarian regimes through benchmark indices that include stocks and bonds from countries experiencing declines in democratic values. Marcos Buscaglia, a recognized expert on Latin America and the intersection of democracy and markets, argues that while current ESG criteria address environmental and social matters, they require a refined approach to democracy.</p>
    <p> <a href="https://www.capitalspectator.com/book-bits-13-january-2024/#more-21411" 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-13-january-2024/" title="4:26 am" rel="bookmark"><time class="entry-date" datetime="2024-01-13T04:26:00-05:00">January 13, 2024</time></a>
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    <p>The yield on the US 10-year Treasury bond continues its downward trend, narrowing the disparity between the elevated market rate and a lesser “fair-value” estimate, derived from the <a href="https://www.capitalspectator.com/10-year-treasury-yield-fair-value-estimate/">averages of three models</a> provided by CapitalSpectator.com.</p>
    <p> <a href="https://www.capitalspectator.com/10-year-us-treasury-yield-fair-value-estimate-12-january-2024/#more-21431" 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/10-year-us-treasury-yield-fair-value-estimate-12-january-2024/" title="7:22 am" rel="bookmark"><time class="entry-date" datetime="2024-01-12T07:22:09-05:00">January 12, 2024</time></a>
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    <p>* The US and UK <a href="https://www.cnn.com/2024/01/11/politics/us-strikes-houthis-yemen/index.html">carry out</a> a retaliatory airstrike against Iranian-backed Houthis in Yemen<br/>* The risk of a US government shutdown is <a href="https://thehill.com/newsletters/morning-report/4404675-morning-report-government-funding-deal-on-thin-ice/">increasing</a> ahead of the January 19 deadline<br/>* Persistent deflation in China<br/>* US consumer credit card delinquencies <a href="https://www.cnn.com/2024/01/11/economy/credit-card-delinquencies/index.html">rise</a> to their highest level since 2012<br/>* Several Wall Street firms <a href="https://www.wsj.com/finance/investing/blackrocks-new-bitcoin-etf-off-to-a-monster-start-5d816b7e">block</a> new Bitcoin ETFs on their trading platforms<br/>* There’s renewed optimism for a 2024 resurgence in value stocks <a href="https://www.morningstar.com/markets/will-value-stocks-take-lead-2024">once more</a>…<br/>* US consumer inflation's annual change <a href="https://www.cnbc.com/2024/01/11/cpi-inflation-report-december-2023-consumer-prices-rose-0point3percent-in-december-higher-than-expected-pushing-the-annual-rate-to-3point4percent.html">ticked up in December</a>, but…<br/>* Core CPI eased <a href="https://www.morningstar.com/markets/hotter-than-expected-december-cpi-report-shows-slow-progress-under-hood">below 4% year-over-year</a> for the first time since May 2021:</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/core.cpi_.12jan2024.png"><img loading="lazy" decoding="async" class="alignnone size-full wp-image-21429" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/core.cpi_.12jan2024.png" alt="" width="929" height="713"  /></a></p>
    <p><strong>US housing costs remain the primary driver of consumer inflation in December. However, as reported by Yahoo Finance, “There seem to be some hopeful signs in the latest data, experts say.”</strong> On a year-over-year basis, shelter inflation is still high, at 6.2%, although this is lower than November’s 6.5% and a peak of 8.2% in March. Omair Sharif, president of Inflation Insight, predicts, “We’re on the cusp of another reduction in shelter inflation.”</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/housing1.png"><img loading="lazy" decoding="async" class="alignnone size-full wp-image-21430" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/housing1.png" alt="" width="650" height="450"  /></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-12-january-2024/" title="6:44 am" rel="bookmark"><time class="entry-date" datetime="2024-01-12T06:44:45-05:00">January 12, 2024</time></a>
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    <p><span style="color: #ff0000;"><strong><a style="color: #ff0000;" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4652814">Optimal Portfolio Choice with Fat Tails and Parameter Uncertainty</a></strong></span><br/>Raymond Kan (U. of Toronto) and Nathan Lassance (LFIN/LIDAM)<br/><strong>December 2023</strong><br/><em>Current portfolio optimization rules, designed for out-of-sample performance under estimation risk, are based on the assumption of multivariate normally distributed returns. This paper demonstrates that this assumption is misleading, as the presence of fat tails in returns increases both the mean and variance of sample portfolios compared to a normal distribution. Thus, portfolio rules should assign reduced weights to the sample mean-variance and sample global minimum-variance portfolios, and increase allocations to the risk-free asset, contrary to traditional guidance. The empirical results show that incorporating the influence of fat tails into optimal portfolio construction significantly enhances out-of-sample performance.</em></p>
    <p> <a href="https://www.capitalspectator.com/research-review-11-january-2024-fat-tail-distributions/#more-21423" 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/research-review-11-january-2024-fat-tail-distributions/" title="7:17 am" rel="bookmark"><time class="entry-date" datetime="2024-01-11T07:17:24-05:00">January 11, 2024</time></a>
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    <p>* Fed’s Williams says there will be no rate cuts until inflation stabilizes at 2% on a ‘sustained basis’: <a href="https://finance.yahoo.com/news/feds-williams-warns-no-rate-cuts-until-inflation-moves-down-to-2-on-sustained-basis-203944371.html">Fed’s Williams</a><br/>* SEC <a href="https://www.cnbc.com/2024/01/10/sec-approves-rule-changes-that-pave-the-way-for-bitcoin-etfs.html">approves regulations</a> paving the path for bitcoin ETFs<br/>* China is set to facilitate foreign investment, <a href="https://www.cnbc.com/2024/01/11/china-will-make-foreign-investment-easier-vice-premier-tells-foreign-execs.html">according to</a> the vice premier<br/>* Economists predict US consumer spending growth will decelerate in 2024 <a href="https://www.cnbc.com/2024/01/10/consumer-spending-growth-will-slow-in-2024-nrf-chief-economist-says-.html">in 2024</a><br/>* <a href="https://www.semafor.com/article/01/10/2024/google-lays-off-hundreds-working-on-its-voice-activated-assistant">Google</a> and <a href="https://www.cnbc.com/2024/01/10/amazon-layoffs-hundreds-of-jobs-cut-in-prime-video-and-mgm-studios.html">Amazon</a> announce significant layoffs<br/>* Legal challenges related to copyright <a href="https://www.techspot.com/news/101475-openai-tells-regulators-training-usable-ai-models-without.html">pose serious risks for OpenAI</a><br/>* Global renewable energy capacity <a href="https://www.ibtimes.com/world-added-50-more-renewable-energy-more-needed-iea-3721868">grew by 50% in 2023</a>, but additional efforts are imperative: IEA</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/icln.11jan2024.png"><img loading="lazy" decoding="async" class="alignnone size-full wp-image-21422" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/icln.11jan2024.png" alt="" width="700" height="312"  /></a></p>
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    By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-11-january-2024/" title="6:56 am" rel="bookmark"><time class="entry-date" datetime="2024-01-11T06:56:29-05:00">January 11, 2024</time></a>
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    <p>Tomorrow's US consumer inflation report for December holds significant importance for market participants, who are optimistic about the outcome. Recent trends in the stock market have been buoyed by hopes that inflation has peaked, which could pave the way for the Federal Reserve to reduce interest rates. Should this scenario unfold, it would likely allow for a rebound in equity prices, which have already shown notable growth in recent months. Simultaneously, US Treasury yields have been declining for similar reasons. The upcoming CPI report will serve as a crucial reality check against these hopeful assumptions.</p>

    <p> <a href="https://www.capitalspectator.com/managing-expectations-for-decembers-consumer-inflation-report/#more-21415" 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/managing-expectations-for-decembers-consumer-inflation-report/" title="7:39 am" rel="bookmark"><time class="entry-date" datetime="2024-01-10T07:39:35-05:00">January 10, 2024</time></a>
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    <p>* Houthi militias <a href="https://www.cnbc.com/2024/01/09/houthi-militias-launch-biggest-attack-to-date-on-merchant-vessels-in-red-sea.html">execute the largest attack yet</a> on merchant vessels in the Red Sea<br/>* US inflation <a href="https://www.bloomberg.com/news/articles/2024-01-10/us-inflation-is-set-to-fade-in-2024-as-goods-prices-keep-falling?srnd=premium">is expected</a> to show further easing in the upcoming report for December<br/>* Will politics influence <a href="https://www.nytimes.com/2024/01/10/business/economy/federal-reserve-policies-during-presidential-election.html">Fed policy</a> this year?<br/>* The World Bank <a href="https://www.bbc.com/news/business-67914707">projects</a> the slowest growth since the pandemic in 2024<br/>* BlackRock, the world's largest asset manager, <a href="https://www.cnn.com/2024/01/09/investing/blackrock-cuts-600-jobs/index.html">announces</a> job reductions<br/>* The US trade deficit unexpectedly <a href="https://money.usnews.com/investing/news/articles/2024-01-09/us-trade-deficit-narrows-in-november-as-imports-fall">narrows</a> in November:</p>
    <p><a href="https://www.capitalspectator.com/wp-content/uploads/2024/01/tradedeficit.10jan2024.png"><img loading="lazy" decoding="async" class="alignnone size-full wp-image-21413" src="https://www.capitalspectator.com/wp-content/uploads/2024/01/tradedeficit.10jan2024.png" alt="" width="644" height="390"  /></a></p>
    <p> <a href="https://www.capitalspectator.com/macro-briefing-10-january-2024/#more-21412" 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/macro-briefing-10-january-2024/" title="6:34 am" rel="bookmark"><time class="entry-date" datetime="2024-01-10T06:34:35-05:00">January 10, 2024</time></a>
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