In June, industrial production saw a modest increase of 0.3%, meeting expectations. This uptick marks the highest growth since February, as reported by the Federal Reserve. The year-over-year gain has now climbed to 2.0% through June, surpassing May’s annual rate of 1.7%. The manufacturing segment, which is particularly sensitive to economic cycles, also experienced growth last month, rising by 0.3%, the best monthly performance since February.
Economic conditions in the U.S. are stabilizing at relatively lower levels compared to the first five months of 2013, according to a market-based assessment of macroeconomic trends. The decline observed through much of June has subsided in recent weeks, leading to a more subdued trend. Despite a significant drop in the Macro-Markets Risk Index (MMRI) in June, it ended yesterday (July 15) at 8.8%, indicating that business cycle risk is low. Although this reading is near its lowest since last August, it remains considerably above the critical threshold of 0%. A value below 0% would suggest an increased risk of recession, while values above 0% indicate economic growth.
Tomorrow’s report on housing starts is anticipated to show a total of 940,000 for June, according to The Capital Spectator’s average econometric forecast (seasonally adjusted annual rate). This projection reflects a moderate increase from the previously reported 914,000 for May. However, it is slightly below numbers from various consensus forecasts based on economists’ surveys.
Retail sales rose by 0.4% in June, which fell short of the consensus forecast. However, this discrepancy is more indicative of overly optimistic predictions than weak consumer spending. It’s important not to overemphasize a single monthly figure, especially one that holds little significance for evaluating the macroeconomic landscape. Notably, though, the year-over-year trend in retail spending has increased for the third consecutive month, suggesting that the risks associated with the business cycle remain low.
The upcoming report on industrial production for June is expected to show a 0.2% increase compared to the prior month, based on The Capital Spectator’s average econometric forecast. This anticipated rise indicates a modest improvement over the previous month’s unchanged reading. Furthermore, The Capital Spectator’s average projection for June aligns closely with expectations set by three consensus forecasts generated from economists’ surveys.
If you were to create a portfolio that reflects a market-value weighted mix of all the major asset classes, what risk premium would you anticipate? My expected return is around 5.2%, give or take. To clarify, my current equilibrium-based forecast for total return (after deducting the risk-free rate) for the Global Market Index (GMI) is also estimated at 5.2% at this time.
● Act of Congress: How America’s Essential Institution Works, and How It Doesn’t
By Robert G. Kaiser
Review via The New York Times
In his book “Act of Congress,” Robert G. Kaiser explores the making of the landmark financial reform bill that became law in 2010. He reveals his concerns about the civility and rising partisan politics within Congress, while also providing insights into a time when lawmakers worked earnestly for the common good.
The upcoming update on U.S. retail sales for June is predicted to show a 0.4% increase compared to the previous month, based on The Capital Spectator’s average econometric forecast. This contrasts with a reported gain of 0.6% for May as recorded by the Census Bureau. Furthermore, this average projection for June falls significantly short of the consensus forecast derived from recent surveys of economists.
During the first week of July, new applications for unemployment benefits unexpectedly rose despite expectations. This spike is likely just a statistical anomaly, as data in July often experiences distortions due to retooling activities in the automotive sector, making week-to-week comparisons particularly unreliable. Even taking this week’s figures at face value, there remains plenty of cause for optimism. Year-over-year comparisons, which minimize seasonal volatility, indicate that moderate growth in the labor market is still on track, with potential for improvement in the months to come.
The July edition of Financial Advisor magazine features an article titled “The Final Frontier”, authored by yours truly, discussing the intricacies of asset allocation. The main takeaway is the importance of actively seeking optimal rebalancing opportunities. The target audience for this piece is financial advisors, who face the challenge of managing dozens, if not hundreds, of portfolios simultaneously. While specialized rebalancing software can greatly assist professionals, individuals managing their own portfolios can effectively use an Excel spreadsheet and an internet connection thanks to today’s technology, which simplifies monitoring one or two portfolios.
This revision enhances the overall readability and flow of the content while maintaining the original HTML structure and positions of the images. Each section clearly conveys the data and analysis, offering a structured presentation of the economic updates.
