In March, global markets experienced a significant rebound, marking the first comprehensive monthly gains across all major asset classes in nearly two years. Emerging market stocks (MSCI EM) led this remarkable turnaround, soaring over 13%—the most substantial monthly increase for the index in years. Additionally, March brought a brief respite from the ongoing bear market in commodities, as the Bloomberg Commodity Index rose nearly 4%.
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● US Jobless Claims rose last week to a two-month high | Bloomberg
● Job cuts declined in March, marking the second consecutive monthly decrease | Challenger Gray
● The US Consumer Comfort Index fell to a three-month low last week | Bloomberg
● Fed’s Dudley states that the US economy is in a ‘good place’ | MNI
● While US employment gains are strong, wage growth remains sluggish | Reuters
● China’s manufacturing activity unexpectedly expanded in March | Reuters
Last week’s post exploring US equity value and momentum risk premiums concluded with a pivotal question: To what extent might we see improvement by implementing a dynamic strategy for managing these risk factors compared to a traditional buy-and-hold approach? Herein lies initial findings seeking to address this question. As a summary, results are mixed; this may stem from factors including a) concentrating solely on value and momentum within the US equity market, b) utilizing a specific definition of these factors (from Professor Ken French’s data library), which offers just a glimpse of modeling opportunities, and c) employing a straightforward tactical model that could potentially adapt parameters to enhance outcomes.
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● ADP reports an addition of 200,000 jobs in the US private sector in March | MarketWatch
● US mortgage applications slipped by 1%, primarily due to fewer refinances | CNBC
● Hiring in the US remains robust in March | MNI
● OECD revises down its global growth forecast for the year | NY Times
● The stock market exhibits skepticism towards Janet Yellen’s stance | Fortune
According to the latest update from the ADP Employment Report, US companies added 200,000 jobs in March (seasonally adjusted). Although this increase was slightly below February’s numbers, the data indicates that the annual trend for private-sector job creation is stabilizing around a low-2% rate. Sustaining this pace could keep the US recovery on track.
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Financial stress levels within the US economy have decreased in recent weeks, following a spike to a four-year high in February. The Cleveland Fed’s multi-factor benchmark, although still elevated historically, has shown a moderate decline this month. Additionally, two other financial stress indexes published by regional Federal Reserve banks have indicated a similar easing of risk levels.
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● Consumer confidence shows improvement in March | MarketWatch
● Janet Yellen indicates that the Federal Reserve still plans to raise interest rates cautiously | NY Times
● Yellen reassures global markets with cautious whispers of rate hikes | Reuters
● S&P/Case-Shiller reports a 5.7% year-over-year increase in US home prices for March | HousingWire
● US Redbook Sales reach an 11-week high | Economic Calendar
● The US State Street Investor Confidence Index rises to a six-month high in March | State Street
The upcoming update of the ADP Employment Report is expected to reveal an increase of 178,000 private nonfarm payroll jobs in March (seasonally adjusted). This represents a modest decline compared to February’s gains, based on The Capital Spectator’s average point forecast drawn from various econometric estimates.
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Whether the US stock market can shake off the bear-market label remains to be seen in the coming weeks. While recent rallies have recouped much of the year-to-date losses, a greater challenge lies ahead: re-establishing the strategic momentum that has been absent since last summer. The outlook appears grim, leaving tactically inclined investors to ponder a straightforward question: Do you feel lucky?
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● US Q1 GDP growth projection has diminished to a sluggish 0.6% | Atlanta Fed
● February saw a slight increase in US consumer spending, while income growth has slowed | LA Times
● The US trade deficit expanded again in February | MarketWatch
● February’s pending home sales reached the highest level since July | CBS MW
● The Dallas Fed factory index for March is the least negative it has been since November | Reuters
In summary, March has marked a turnaround for global markets, signifying cautious optimism in various sectors. Despite challenges still present in the economic landscape, including rising jobless claims and cautious consumer sentiment, the overall indicators point towards a resilient recovery trajectory. Stakeholders will be closely monitoring these developments in the months ahead.