In the upcoming update of February’s ADP Employment Report, private nonfarm payrolls in the United States are forecasted to rise by 213,000 (seasonally adjusted), according to the median forecast by The Capital Spectator based on various econometric models. This projection mirrors the increase observed in January.
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The anticipated risk premium for the Global Market Index (GMI) has experienced its first increase in six months according to February’s estimates. GMI—an unmanaged, market-value weighted combination of the major asset classes—is expected to achieve an annualized return of 4.0% above the “risk-free” rate in the long run. This updated estimate, grounded in data up until the close of last month, has risen by 50 basis points from the previous projection of 3.5%.
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● Weak US consumer spending indicates slower growth in the first quarter | Reuters
● German retail sales increase at the fastest rate in seven years | Reuters
● U.S. manufacturing growth reaches its lowest in 13 months | RTT
● US construction spending declines by 1.1 percent in January | Fox
● Global manufacturing continues its steady growth in February | Markit
February brought about a reversal among major asset classes as previous winners and losers exchanged places. The bearish trend in commodities (Bloomberg Commodity Index) halted, marking the asset class’s first monthly gain since June 2014. Conversely, the previously high-performing real estate sector (real estate investment trusts) faced a setback in February, resulting in a 3.6% decline in total returns for REITs (MSCI REIT Index), their first negative performance in five months. The clear top performer was foreign equities in developed markets, with the MSCI EAFE climbing 6.0% in US dollar terms (unhedged). U.S. equities followed closely behind with a 5.8% rise via the Russell 3000 Index.
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● The dollar remains near an 11-year high following a cut in Chinese rates, with attention on the ECB | Reuters
● China’s factory output sees its first increase in four months | Markit
● Eurozone consumer prices decline by less than anticipated in February | RTT
● Eurozone jobless rate drops to 11.2% in January | Eurostat
● Manufacturing in the Eurozone maintains modest growth in February | Markit
● Germany’s Manufacturing PMI indicates slight improvement | Markit
● UK factory activity reaches a seven-month high, surpassing forecasts | RTT
Economists anticipate a minimal change or slight decline in the upcoming January update regarding personal consumption expenditures (PCE) compared to December. The consensus forecast via Econoday.com is flat, while Briefing.com’s analyst survey predicts a minor decrease. This expectation aligns with January’s retail sales report, which showed a drop of 0.8%. A more optimistic view suggests that weak headline spending is largely due to “falling gasoline sales in dollar terms,” as previously discussed in my analysis, which indicates a more encouraging trend when excluding fuel purchases—especially when viewed on a year-over-year basis. Given the ongoing strength in payroll growth, the pivotal question remains whether the PCE data will provide a different outlook.
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The ISM Manufacturing Index is projected to drop to 52.8 in tomorrow’s update (March 2) for February, compared to the previous month. This prediction, derived from The Capital Spectator’s median point forecast across several econometric estimates, remains above the neutral mark of 50.0, indicating moderate growth in the US manufacturing sector.
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● Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies
By Meb Faber
Summary via Amazon
This book examines whether our focus on assets and their allocation may overlook larger trends. It begins with an analysis of the historical performance of various popular assets, including stocks, bonds, and cash, and considers the influence of inflation on personal finances. The discussion then shifts towards diversification strategies that combine various assets—such as stocks and bonds—to minimize the risks associated with volatile asset classes. The book also delves into global asset allocation, assessing real assets alongside traditional investments. It tracks the performance of 13 assets since 1973, highlighting various well-known portfolios such as Ray Dalio’s All Weather portfolio and the Endowment portfolio, revealing that many allocations exhibit similar risk exposures despite notable exceptions.
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Asset allocation is paramount among essential investment decisions, yet benchmarking and analysis in this realm can prove challenging. Given that portfolio design and management should be tailor-made for each investor, monitoring the performance of general strategies can provide useful insights. With this perspective, I will regularly assess a variety of asset allocation funds to gauge their effectiveness and to explore different evaluation techniques for portfolios.
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● U.S. durable goods orders rebound by 2.8% in January | RTT
● Jobless claims in the U.S. see the largest jump since December 2013 | Bloomberg
● Consumer prices decline primarily due to dropping gas prices | NY Times
● The dollar heads for its eighth consecutive month of gains driven by U.S. data and Fed projections | Reuters
● Eurozone macro index rises for the third month in February | RTT
● Japanese economic data indicates a slow but steady recovery despite lower oil prices | USN&WR
### Introduction
This article reviews recent economic forecasts and data, focusing on employment trends, consumer spending, and performance across various asset classes. With insights provided by notable economists, we will explore essential updates and projections impacting the financial landscape.
### Conclusion
As we analyze these economic indicators, it becomes increasingly clear that variations in consumer behavior and asset performance will play significant roles in shaping the future economic environment. Continuous monitoring can help navigate these fluctuations effectively.
