Stanley McChrystal and Anna Butrico
Summary via publisher (Penguin Random House)
Retired four-star general Stan McChrystal has navigated high-stakes environments throughout his career, from his tenure at West Point to his experiences in Afghanistan and his guidance to business leaders during a global pandemic. He observes that both individuals and organizations often struggle to manage risk effectively. This challenge arises from an overemphasis on the likelihood of adverse events rather than on strategic management approaches. In his new book, General McChrystal presents a robust framework for recognizing and responding to risk. Rather than viewing risk solely as a predictive challenge, McChrystal and coauthor Anna Butrico identify ten adjustable dimensions of control. By keeping a close watch on these controls, we can cultivate a strong Risk Immune System, enabling us to foresee, recognize, analyze, and act on the perennial uncertainties that life presents.
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<li><em>Commodities achieve notable weekly gains</em></li>
<li><em>All but one of our portfolio benchmarks experienced gains this week</em></li>
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<p><em><strong>Maximizing opportunities in commodities:</strong></em> Broadly defined commodities reported a third consecutive week of gains, marking the strongest weekly performance within our 16-fund global opportunity set that encompasses major asset classes (as of today's close, Friday, Oct. 8). <em>For detailed insights on all strategies and metrics in our tables, <a href="https://www.capitalspectator.com/wp-content/uploads/2021/08/definitions1.11aug2021.pdf">see this summary.</a></em></p>
<p><em><a href="https://etfps.substack.com/p/the-etf-portfolio-strategist-8-october">continue reading at The ETF Portfolio Strategist</a></em></p>
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By James Picerno | <a href="https://www.capitalspectator.com/the-etf-portfolio-strategist-8-october-2021/" title="6:26 pm" rel="bookmark"><time class="entry-date" datetime="2021-10-08T18:26:29-04:00">October 8, 2021</time></a>
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<p><strong><span style="color: #800000;"><a style="color: #800000;" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3924346">Time-Varying Factor Allocation</a></span></strong><br/>Stefan Vincenz and Tom Oskar Karl Zeissler (Vienna U. of Economics and Business)<br/><strong>September 15, 2021</strong><br/><em>This empirical study presents evidence on utilizing predictive information for profitable cross-asset factor portfolio allocation across various asset classes, including equity, commodities, fixed income, and foreign exchange. We evaluate a selection of effective predictors, dividing them into macro and market indicators. Our findings indicate that adjusting a global factor portfolio based on signals from business cycle indicators, inflation trends, and short-term interest rates significantly outperforms a static factor benchmark. The results withstand conservative transaction cost assumptions and are validated over an extensive out-of-sample period. Overall, we emphasize the benefits of an asset-allocation framework based on predictive variables while cautioning against timing factors in isolation.</em></p>
<p> <a href="https://www.capitalspectator.com/research-review-8-october-2021-dynamic-portfolio-strategies/#more-16830" 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-8-october-2021-dynamic-portfolio-strategies/" title="6:55 am" rel="bookmark"><time class="entry-date" datetime="2021-10-08T06:55:30-04:00">October 8, 2021</time></a>
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<p>* Senate <a href="https://www.politico.com/news/2021/10/07/senate-leaders-strike-deal-on-short-term-debt-limit-patch-515578">approves</a> short-term resolution to raise the US debt ceiling<br/>* China's energy crisis is <a href="https://www.bloomberg.com/news/articles/2021-10-07/china-s-energy-crisis-envelops-an-already-slowing-global-economy">affecting</a> the global economy<br/>* China <a href="https://www.reuters.com/world/asia-pacific/chinas-top-coal-region-tells-mines-boost-output-immediately-sources-2021-10-08/">mandates</a> increased coal production to mitigate energy shortages<br/>* The natural gas sector <a href="https://www.wsj.com/articles/natural-gas-shortage-sets-off-scramble-ahead-of-winter-11633635902?mod=hp_lead_pos4">struggles</a> to meet demands amid supply shortfalls<br/>* An international minimum tax agreement could be <a href="https://www.cnbc.com/2021/10/07/ireland-corporate-tax-rate-.html">announced</a> as early as today<br/>* US consumer credit growth <a href="https://www.marketwatch.com/story/consumer-credit-grows-in-august-at-the-smallest-rate-in-seven-months-11633634484">slowed</a> to a seven-month low in August<br/>* The Chinese services sector experienced a <a href="https://www.markiteconomics.com/Public/Home/PressRelease/346015a15abf4e8689dc94c7c577c072">rebound</a> in September<br/>* US jobless claims <a href="https://www.cnbc.com/2021/10/07/us-jobless-claims.html">declined</a> more than anticipated last week, nearing pre-pandemic lows:</p>
<p><a href="https://www.capitalspectator.com/wp-content/uploads/2021/10/claims.08oct2021.png"><img fetchpriority="high" decoding="async" class="alignnone size-full wp-image-16828" src="https://www.capitalspectator.com/wp-content/uploads/2021/10/claims.08oct2021.png" alt="" width="650" height="450" /></a></p>
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By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-8-october-2021/" title="6:08 am" rel="bookmark"><time class="entry-date" datetime="2021-10-08T06:08:46-04:00">October 8, 2021</time></a>
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<p>Stocks exhibiting the highest <a href="https://www.investopedia.com/terms/b/beta.asp">beta-risk</a> continue to dominate the US factor performance in 2021, significantly outperforming their counterparts across a range of exchange-traded funds.</p>
<p> <a href="https://www.capitalspectator.com/high-beta-stocks-still-leading-us-equity-factor-returns-this-year/#more-16823" 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/high-beta-stocks-still-leading-us-equity-factor-returns-this-year/" title="7:11 am" rel="bookmark"><time class="entry-date" datetime="2021-10-07T07:11:12-04:00">October 7, 2021</time></a>
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<p>* Democrats <a href="https://www.politico.com/news/2021/10/06/republicans-filibuster-debt-limit-515355">expected</a> to agree to Republican plan to extend the debt deadline to December<br/>* CDC director <a href="https://www.cnbc.com/2021/10/06/cdc-director-warns-the-us-is-at-risk-of-a-severe-flu-season-this-year.html">indicates</a> the US could face a severe flu season<br/>* Biden and Xi <a href="https://www.reuters.com/world/china/us-says-agreed-with-china-virtual-biden-xi-summit-before-years-end-2021-10-06/">plan</a> to hold a virtual summit<b> <br/>* Fed Chair Powell faces <a href="https://www.bloomberg.com/news/articles/2021-10-07/powell-s-path-to-new-term-gets-trickier-on-trading-furor-warren?srnd=premium">challenges to renomination</a> amidst political pressures<br/>* Natural gas prices retreated as Russia <a href="https://www.marketwatch.com/story/natural-gas-futures-retreat-as-putin-says-russia-will-boost-supplies-to-europe-11633525453">committed</a> to increasing supplies to Europe<br/>* Analysts <a href="https://www.cnbc.com/2021/10/07/europe-is-now-a-hostage-to-russia-over-energy.html">caution</a> that Europe could become dependent on Russia for energy<br/>* The first malaria vaccine in the world has been <a href="https://www.statnews.com/2021/10/06/in-major-decision-who-recommends-broad-rollout-of-worlds-first-malaria-vaccine/">approved</a> for use in Africa<br/>* GM <a href="https://www.cnn.com/2021/10/06/investing/gm-sales-growth-target/index.html">anticipates</a> that its shift to an all-electric vehicle lineup will increase sales<br/>* US companies <a href="https://adpemploymentreport.com/2021/September/NER/NER-September-2021.aspx">added jobs</a> at the fastest rate in three months during September:</p>
<p><a href="https://www.capitalspectator.com/wp-content/uploads/2021/10/adp1.07oct2021.png"><img decoding="async" class="alignnone size-full wp-image-16822" src="https://www.capitalspectator.com/wp-content/uploads/2021/10/adp1.07oct2021.png" alt="" width="654" height="403" /></a></p>
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By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-7-october-2021/" title="6:04 am" rel="bookmark"><time class="entry-date" datetime="2021-10-07T06:04:26-04:00">October 7, 2021</time></a>
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<p>Identifying attractive opportunities in global markets is becoming increasingly challenging. After an extended period of growth for many risk assets, the less obvious opportunities have largely been exhausted. However, there are still <em>comparatively</em> appealing markets available. Standard caveats apply, but we must make the best of what we have.</p>
<p>For instance, a new column titled <em>Spread</em> has been added to the periodic return estimates for major asset classes on these pages (<a href="https://etfps.substack.com/p/the-etf-portfolio-strategist-18-august">see this introduction for background</a>). The purpose of this new metric is to identify markets where trailing 10-year returns significantly diverge from performance forecasts, derived from three averaging models. The reasoning is simple: If asset <em>x</em> has a trailing return substantially lower than the expected return, it presents a case for overweighting (and vice versa).</p>
<p><a href="https://etfps.substack.com/p/the-etf-portfolio-strategist-6-october"><em>continue reading at The ETF Portfolio Strategist</em></a></p>
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By James Picerno | <a href="https://www.capitalspectator.com/the-etf-portfolio-strategist-6-october-2021/" title="5:57 pm" rel="bookmark"><time class="entry-date" datetime="2021-10-06T17:57:08-04:00">October 6, 2021</time></a>
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<p>The expectations for the upcoming third-quarter GDP report are becoming progressively less optimistic, according to a range of nowcasts. The release scheduled for October 28 by the Bureau of Economic Analysis is still projected to show a solid increase in output, but recent updates indicate a subtle yet continuous decline in estimates.</p>
<p> <a href="https://www.capitalspectator.com/us-economic-growth-estimate-for-q3-ticks-lower-again/#more-16813" 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-estimate-for-q3-ticks-lower-again/" title="7:16 am" rel="bookmark"><time class="entry-date" datetime="2021-10-06T07:16:04-04:00">October 6, 2021</time></a>
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<p>* Treasury Secretary warns that a recession may loom if Congress does not raise the debt ceiling <a href="https://www.cnbc.com/2021/10/05/debt-ceiling-us-faces-recession-if-congress-doesnt-act.html">warned</a>.<br/>* Biden has reluctantly <a href="https://apnews.com/article/joe-biden-business-congress-f6fc8e4ea79642a7e04e28211c00db9a">agreed</a> to scale back the Democrats’ ambitious budget proposal.<br/>* Tensions between Taiwan and China are at their <a href="https://www.bbc.com/news/world-asia-58812100">highest in 40 years</a>, according to Taiwan’s defense minister.<br/>* A resurgence in imports <a href="https://www.wsj.com/articles/u-s-trade-deficit-widens-to-record-august-as-imports-rebound-11633438717">has driven</a> a record US trade deficit for August.<br/>* New Zealand <a href="https://www.reuters.com/world/asia-pacific/new-zealand-raises-interest-rates-more-tightening-come-2021-10-06/">increased</a> interest rates for the first time in seven years.<br/>* German factory orders <a href="https://www.bnnbloomberg.ca/german-factories-plunge-more-than-expected-amid-supply-squeeze-1.1662361">dropped</a> more than expected in August.<br/>* Global economic growth <a href="https://www.markiteconomics.com/Public/Home/PressRelease/b09e7b7d85d04247a7231c85776bd5e7">showed an uptick</a> in September via PMI survey data.<br/>* US business growth <a href="https://www.markiteconomics.com/Public/Home/PressRelease/218e75e14844413ebefe0cb1d1a64a6f">recorded</a> its slowest growth in nine months according to September survey data.<br/>* Healthcare once again emerged as the <a href="https://www.markiteconomics.com/Public/Home/PressRelease/b4f891d45a6343d88c17b1cada6fc15f">fastest-growing</a> sector in the US for September according to survey data.<br/>* The ISM Services Index <a href="https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/september/">continued to indicate</a> strong growth for the sector in September:</p>
<p><a href="https://www.capitalspectator.com/wp-content/uploads/2021/10/ism1.services.06oct2021.png"><img decoding="async" class="alignnone size-full wp-image-16812" src="https://www.capitalspectator.com/wp-content/uploads/2021/10/ism1.services.06oct2021.png" alt="" width="608" height="340" /></a></p>
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By James Picerno | <a href="https://www.capitalspectator.com/macro-briefing-6-october-2021/" title="6:10 am" rel="bookmark"><time class="entry-date" datetime="2021-10-06T06:10:16-04:00">October 6, 2021</time></a>
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<p>The risk-adjusted performance of the Global Market Index (GMI), an unmanaged portfolio comprising major asset classes (excluding cash), continued to improve in September. However, despite the setbacks in markets last month, the GMI's trailing 10-year Sharpe ratio may have reached its peak for this cycle.</p>
<p> <a href="https://www.capitalspectator.com/major-asset-classes-september-2021-performance-review/">Continue reading <span class="meta-nav">→</span></a></p>
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By James Picerno | <a href="https://www.capitalspectator.com/major-asset-classes-september-2021-risk-profile/" title="7:24 am" rel="bookmark"><time class="entry-date" datetime="2021-10-05T07:24:06-04:00">October 5, 2021</time></a>
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