Recent developments in global economics present a mixed picture. In the United States, a criminal investigation has been launched regarding the involvement of pharmaceutical companies in the opioid epidemic: WSJ. Meanwhile, China’s economy continues to experience a slowdown as of November: Bloomberg. Furthermore, a recent opinion piece discusses the economic divide emerging globally, often referred to as the economic iron curtain: NY Times.
Despite these concerning trends, the US trade deficit experienced a significant reduction in October: Reuters. However, sales of new homes in the US unexpectedly declined in October: CNBC, although home prices showed some appreciation in September: CNBC. The Richmond Fed Manufacturing Index registered a slight negative reading in November: RF, and consumer confidence in the US once again dipped in November: MW.
Tomorrow, revised GDP figures for the third quarter are anticipated to remain at a growth rate of 1.9%, according to forecasts compiled by Econoday.com. This moderate increase may represent a stretch given the projections for the fourth quarter based on the latest data collated by The Capital Spectator.
Recent hints of progress in US-China trade negotiations have been noted: Bloomberg. Federal Reserve Chairman Powell indicated that the robust labor market still has potential for further growth: NY Times. He also emphasized the Fed’s commitment to achieving a 2% inflation target: CNBC.
Americans appear optimistic about their Christmas spending, expecting to increase it substantially: Gallup. Meanwhile, financial advisers express concerns about potential disadvantages in the Schwab-TD Ameritrade merger: WSJ. The Dallas Fed Manufacturing Index indicated a modest contraction in November: DFed, and US economic activity continued to decelerate in October: Chicago Fed.
Many of the major asset classes experienced declines last week, according to data from various exchange-traded funds. However, US investment-grade bonds and international real estate stocks defied this downward trend. Overall, global markets faced challenges during the trading week ending November 22.
The US Navy Secretary resigned amid controversy surrounding a case involving Navy SEALs: Reuters. In Hong Kong, pro-democracy candidates achieved significant victories in recent elections: Reuters. In Germany, business sentiment showed slight improvement in November: Bloomberg.
However, capital expenditures among S&P 500 companies have slowed, presenting potential economic challenges: WSJ. A security forum focused on the increasing pressures facing Western democracies: Politico. Interestingly, US consumers remain positive as of November: CNBC, while the Kansas City Fed Manufacturing Index saw further declines this month: Mstar.
By Glen Arnold
Summary via publisher (Harriman House)
In this second volume of The Deals of Warren Buffett, the narrative continues, tracing Buffett’s ascent to his first billion-dollar milestone. Following the conclusion of Volume 1, Buffett’s net worth stood at $100 million. This upcoming edition details two more decades of his investment strategies that led him to billionaire status. It encapsulates the most thrilling period of Buffett’s career, highlighting his knack for uncovering prime investment opportunities both in the stock market and among well-managed family businesses boasting strong economic franchises. During this time, Berkshire Hathaway’s shares surged 29-fold, from $89 to $2,600.
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ETF Momentum
Frank Weikai Li (Singapore Management University), et al.
October 12, 2019
This study documents substantial momentum profits when sorting ETFs based on returns from the past two to four years. A value-weighted long-short strategy that capitalizes on ETF momentum yields Carhart (1997) four-factor alphas of up to 1.20% per month. The findings suggest that neither cross-sectional stock momentum nor co-movement with macroeconomic risks can fully account for ETF momentum. Instead, the observed post-holding period returns align more closely with behavioral theories of delayed overreaction. While ETF momentum persists even after accounting for transaction costs, it may be challenging to arbitrage due to its volatility and concentration in ETFs with high idiosyncratic volatility or those that hold stocks with low analyst coverage.
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Bridgewater, the world’s largest hedge fund, is betting heavily on a market downturn: WSJ. The Eurozone economy showed virtually no growth for the third consecutive month in November: IHS Markit, and the UK economy is contracting at its sharpest rate in three years, also as of November: IHS Markit. In Japan, economic activity has stagnated: IHS Markit.
Negotiations surrounding the NAFTA’s successor are ongoing, with a vote expected in the upcoming weeks: NY Times. The US Leading Economic Index saw a decline for the third consecutive month in October: CB. Despite this, existing home sales in the US increased by 1.9% in October: WSJ. The Philadelphia Fed’s regional manufacturing index recorded stronger growth in November: Philly Fed, while jobless claims in the US remained steady at a five-month high last week: CNBC. Notably, the US business cycle index (ADS) has rebounded after previously nearing recession levels: falling close to recession signal:
There’s ongoing dialogue about the potential resurgence of small-cap equities. However, year-to-date performance suggests otherwise, as illustrated by data from a selection of exchange-traded funds.
Sondland reveals that Trump initiated efforts to pressure Ukraine: Politico. There are concerns that the US-China trade agreement could be jeopardized should Trump sign a bill concerning Hong Kong: CNBC. In a positive light, China has invited US representatives for renewed trade discussions: WSJ.
Minutes from the Federal Reserve indicate that further rate cuts are not anticipated: MW. Additionally, Charles Schwab is reportedly in discussions to acquire TD Ameritrade: CNBC. The OECD warns that Europe’s quantitative easing policies may exacerbate the challenges posed by negative interest rates: Bloomberg.
In trade relations, German exports to the United States saw a notable increase in Q3: Reuters, while political challenges are saddling Israel, where efforts to form a government have stalled, indicating yet another potential election: NPR. Moreover, the percentage of Americans relocating has dipped below 10%, the lowest level since 1947: NY Times. Lastly, US commercial lending has seen a growth rate fall to +4.7% in October, its lowest in a year and a half:
