At the close of last year, the global economy exhibited modest growth, but the expansion rate has declined to a 14-month low, as revealed by the December update of the JPMorgan Global All-Industry Output Index. The press release stated, “The fundamental dynamics of the survey are weaker across the board, with indices for output, new orders, backlogs, and employment all trending lower.” While some analysts wonder if this indicates an impending global recession, many prominent forecasting agencies do not share this view.
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● Economy Provides Obama a Modest Boost Before Sixth State of the Union | NBC
● German ZEW Economic Sentiment Soars to 11-Month High in January | Investing.com
● Decline in German Producer Prices Intensifies Pressure on ECB | IBT
● China’s Economy Grows 7.4% in 2014; Lowest Rate Since 1990 | USA Today
● As Growth Decelerates, China Hopes for Increased Consumer Spending | NY Times
● Global Economic Growth Anticipated to Show Modest Improvement in 2015 | UN
How is your rebalancing strategy performing? Results can vary significantly depending on when the analysis is conducted, the strategy’s structure, and various other factors. Evaluating whether the outcomes are satisfactory or disappointing is influenced by multiple elements, including asset selection, rebalancing rules, and the choice of ETFs for implementation. It is essential to closely monitor risk and return—and to grasp what influences the results—whether you’re backtesting a rebalancing concept or managing an existing portfolio in real-time. Fortunately, this important task can be simplified with R, the data analysis software. For instance, let’s examine a straightforward 60% stock and 40% bond strategy utilizing a couple of ETFs.
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● Will the Fed Shift to a More Dovish Stance? | Tim Duy’s FedWatch
● Chinese Stocks Take a Nosedive, Falling 8% as Regulators Intervene | Fortune
● Euro Hits Nearly 11-Year Low as Investors Anticipate ECB’s Quantitative Easing | Reuters
● Syriza Claims Readiness to Govern Greece, Assuring Europe Not to Fear | Euronews
● China Expected to Fall Short of 2014 Growth Target | RTT
● Insights Into Risk Models from the Swiss FX Shock | VoxEU
● Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again
by Peter J. Wallison
Essay by the author via San Diego Union-Tribune
Last month, any doubts regarding the lessons learned from the financial crisis were put to rest when the six federal regulatory agencies mandated by the Dodd-Frank Act backed away from defining what constitutes a high-quality prime mortgage. Instead, they issued a final rule equating a prime mortgage to a loan with no minimum down payment and no required minimum credit score.
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Given the current uncertainty in global markets, today’s update on U.S. industrial production for December appears reasonable. Although production dipped by 0.1% compared to November, “warmer-than-usual temperatures reduced demand for heating,” leading to “a sharp drop in utility output,” according to the Federal Reserve. Notably, industrial production excluding utilities experienced a healthy 0.7% increase last month. Additionally, manufacturing activity, the primary component of industrial output, grew by 0.3% in December, as reported by the Fed.
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The global economy requires higher inflation, and if it fails to achieve this soon, the persistent disinflationary pressures may spiral into outright deflation. This situation serves as a crucial reminder for central banks, indicating that the repercussions of the Great Recession are still evident today. While some may assume recovery from this downturn, it’s clear that the risks associated with declining prices have not been fully eliminated. Instead, they linger, highlighting the need for renewed measures to combat these economic challenges.
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● IMF Chief Warns of Strong Headwinds Facing Global Recovery | RTT
● Eurozone December Price Falls Confirmed Before ECB Decision | Reuters
● U.S. Jobless Claims Surge to Four-Month High | Reuters
● U.S. Producer Prices Experience Largest Drop in Three Years | Wall St Journal
● NY Fed Empire State Manufacturing Report Reveals Expanding Activity | Bond Buyer
● Philly Fed: Manufacturing Activity in Philadelphia Grows at a Slower Pace | AP/ABC
● U.S. Consumer Confidence Rises to Highest Level Since July 2007 | Bloomberg
According to The Capital Spectator’s median point forecast for several econometric estimates, U.S. industrial production is expected to increase by 0.3% in tomorrow’s December report compared to the previous month. This prediction indicates a significant slowdown in growth relative to the prior month’s increase of 1.3%.
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It is widely accepted in the market that the European Central Bank (ECB) is on the brink of launching a quantitative easing program, which involves purchasing government bonds with newly minted currency. A recent legal ruling confirmed this path, with a lawyer from the European Court of Justice indicating that the ECB’s bond-buying program complies with EU law. However, discussions surrounding the ECB and quantitative easing are riddled with uncertainty. The outlook for the potential results of this next phase of monetary stimulus and the implementation process remains unclear and fraught with unknowns.
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As we reflect on the economic indicators and trends from early 2015, we can observe that while certain areas displayed growth potential, underlying uncertainties remain prevalent. The interconnectedness of global markets and the resulting effects of regulatory decisions continue to shape our economic landscape. It will be essential for financial observers to stay vigilant in their assessments, as the evolving situations may reveal new pathways for growth or additional challenges ahead.
In conclusion, the international economic environment requires us to adapt and respond quickly to changing conditions. Continuous analysis and monitoring will be imperative as we navigate the complexities of global finance, ensuring preparedness for both opportunities and potential challenges that lie ahead.