Consumer discretionary stocks have maintained their leading position over the past year, although their advantage is diminishing. In contrast, the energy sector has seen significant declines, further solidifying its position as the worst-performing equity sector in the United States, according to an analysis of various sector ETFs.
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● Job Openings in the U.S. Increased in November | Bloomberg
● U.S. Small Business Optimism Slightly Increased in December | 24/7 Wall St
● U.S. Redbook: January sales growth slowed during clearance week | MNI
● China’s trade data alleviates economic concerns | Reuters
● Eurozone Industrial Output Declined More Than Expected in November | RTT
● Obama’s Optimistic State of the Union at Odds With Voter Concerns | Bloomberg
Are you aware of where the risk in your portfolio originates? Certainly, since you crafted the portfolio and the asset allocations reflect the associated risks. A 50% weighting in stocks suggests a 50% contribution to overall portfolio risk—this is a solid first approximation. However, this estimate can be oversimplified and may lead to inaccuracies, especially as market conditions evolve—particularly within a multi-asset class strategy. To accurately gauge the risk contributions from each component within the portfolio—an essential aspect of risk management—we need to delve deeper using more advanced analytical tools.
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● The Fed’s U.S. Labor Conditions Index Increased to 2.9 in December | Bond Buyer
● Employment Trends Index for the U.S. Rebounded in December | CB
● Atlanta Fed President Lockhart Anticipates U.S. Economic Growth in 2016 | Atlanta BC
● Atlanta Fed’s ‘GDP Now’ Forecast Significantly Lower Than Consensus | Barron’s
● U.K. Industrial Output Plummeted to Its Lowest in Nearly Three Years | Bloomberg
● German Machine Orders Increased for the Second Consecutive Month in November | MNI
● Oil Prices Dropped 3% to Just Above $30 | Reuters
● RBS Urges ‘Sell Everything’ Amid Imminent Deflationary Crisis | Telegraph
David Stockman argues that recent payrolls data revealed a surprising increase in December primarily due to seasonal adjustments. The impressive figure of 292,000, once adjusted for seasonal factors, drops to a modest 11,000 in unadjusted terms. His skepticism about interpreting economic data through seasonal adjustments is valid. However, he does not mention that a year-over-year comparison can help mitigate the noise in such data. Monitoring job creation through this lens provides a reliable way to analyze trends. In fact, an annual comparison of the latest jobs report, whether raw or seasonally adjusted, shows nearly identical growth rates: approximately 1.9% for both in December relative to the previous year.
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The year commenced with a disappointing performance for most major asset classes, based on total returns from a selection of proxy ETFs. Investment-grade U.S. bonds saw a slight uptick in the first five trading days through January 8. Thanks in part to a slightly weaker dollar last week, foreign government bonds from developed markets and foreign high-yield bonds also made modest gains. However, losses prevailed across the board.
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● Strong U.S. Payrolls in December Enhance Economic Outlook | Reuters
● Consumer Borrowing in the U.S. Increased at the Slowest Rate in Ten Months | Bloomberg
● Unexpected 0.3% Decline in U.S. Wholesale Inventories for November | RTT
● Why the Fed Must Prepare for the Worst Now | Larry Summers (WaPo)
● Are We Already in a Recession? Not Quite Yet | MarketWatch
● China’s Inflation Slightly Increased in December, PPI Down | RTT
● China’s Decrease in U.S. Bonds Draws Little Concern | Bloomberg
● The Rise and Fall of American Growth:
The U.S. Standard of Living since the Civil War
By Robert Gordon
Review via The Wall Street Journal
In his latest book, “The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War,” economist Bob Gordon from Northwestern University argues that the period between 1870 and 1970 was exceptionally favorable for U.S. households (especially from 1920 to 1950), but the years since 1970 have been lackluster and suggest that the future may be similarly disappointing.
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U.S. companies added a robust 275,000 jobs (seasonally adjusted) in December, as reported by the Labor Department in its latest employment report. This increase surpassed the consensus forecast significantly, bringing a wave of optimism following a bearish start to the new year for markets.
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This week, the U.S. stock market experienced its worst four-day start to a year on record, as of January 7th. Essentially, expected returns soared more than ever during these first four days of January. Nevertheless, it’s challenging to determine the extent of this theoretical shift in expected performance and how or if it will convert into actual market gains. Amid heightened global volatility, maintaining a clear perspective and a sound risk management strategy is crucial.
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As we reflect on recent trends in various sectors and economic indicators, it becomes clear that market dynamics are constantly in flux. Understanding these changes can enhance our investment strategies and decision-making processes, ultimately leading to better risk management and financial outcomes.
In conclusion, fluctuating asset classes and economic performance will continue to challenge investors. By staying informed and utilizing detailed analyses, we can navigate these complexities to make wise investment choices.
