As the inflation discussion continues to gather momentum, please join guest speakers VanEck Portfolio Managers Shawn Reynolds and Roland Morris, Deputy Portfolio Manager Charles Cameron, and sector specialists Veronica Zhang from VanEck’s natural resource equity and commodity strategies.
It seems like it’s been awhile since there’s been such a strong alignment in commodities and natural resources, from tailwinds associated with the global recovery to strong fundamentals, valuations and growth prospects across industries at a company level. The VanEck team will guide you through an in-depth look at the latest trends, their implications and potential opportunities with an overview on our diverse solutions available to access this space.
The weak dollar, low-interest rates, and accelerating growth—these are just three of an array of factors that argue in favor of increasing your clients exposure to emerging markets.
Join us Wednesday, March 10, for a review of EM investment opportunities. Headlining our webcast panel will be Calamos Founder, Chairman, and Global Chief Investment Officer John P. Calamos, Sr. Joining John will be:
In addition to covering secular growth themes (monetary and fiscal stimulus, China’s global leadership, growth and inflation expectations, the weaker dollar, and strengthening liquidity), you’ll hear the Calamos’ take on several thematic tailwinds driving the EM opportunity, including:
We’ll conclude our discussion with a review of the differentiated approach of Calamos Evolving World Growth Fund (CNWIX), which has successfully pursued a favorable risk/reward skew through bottom-up security selection, top-down thematic analysis, and opportunistic use of less-well-known asset classes, such as convertible securities.
The BEA's Core Personal Consumption Expenditures Chain-type Price Index for January, released last week, shows that core inflation is below the Federal Reserve's 2% long-term target at 1.53%. The January Core Consumer Price Index release is currently lower, at 1.41%. The Fed is on record as using Core PCE data as its primary inflation gauge.
The late-February spike in U.S. Treasury bond yields sent ripples throughout the global markets. As yields surged to the highest level in a year, stocks and commodities sold off sharply, while the dollar rallied.
As more plan participants worry about retirement income security, demand for guaranteed income solutions is growing—and plan sponsors are pondering the options.
There is hope that economies will see a more sustainable and robust recovery this year, given unprecedented levels of monetary and fiscal stimulus and as more individuals are vaccinated against COVID-19. But one question for investors is what happens next—will inflation and higher interest rates be a consequence?
In the near term, markets should not be too worried about a possible spike in demand driving up inflation and interest rates, causing asset prices to fall across the board. But longer-term inflation risks are skewed much more to the upside than many investors and policymakers seem to realize.
How long will the effects of COVID be felt in potential growth, the tourism sector and bankruptcy filings?
Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Are we in the beginning stages of another secular bear?
This morning the Institute for Supply Management published its monthly Manufacturing Report for February. The latest headline Purchasing Managers Index (PMI) was 60.8, an increase of 2.1 from 58.7 the previous month and in expansion territory. Today's headline number was above the Investing.com forecast of 58.8 percent.
The February US Manufacturing Purchasing Managers' Index conducted by Markit came in at 58.6, down 0.6 from the 59.2 final January figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
Clients face three big risks in retirement from the sequence of returns, volatility and asset shortfalls. Michael Hirthler, the founder and chief investment officer at Pennsylvania-based Jacobi Capital Management, explained to me how he uses the Big Picture app to explain those risks to his clients.
Quick take: Based on the February S&P 500 average of daily closes, the Crestmont P/E is 166% above its arithmetic mean and at the 100th percentile of this fourteen-plus-decade monthly metric.
The markets took a tumble to start this week as rising interest rates and inflationary pressures begin to weigh on outlooks. Those worries quickly diminished as Jerome Powell changed the rules to reassure Wall Street that “QE” is here to stay.
Yields have jumped so much, in fact, that they’re giving stocks a serious run for their money. The 10-year yield is now higher than the S&P 500 dividend yield, which may have added to the selling pressure that cost stocks close to 2.5% yesterday.
What normalcy will it be? I don’t expect to simply go back to the way things were. The economy as it was structured in December 2019 is gone forever. The world is different now. The economy will be different, too.
The S&P 500 dropped three out of the five days this week, ending Friday down 0.48% from Thursday. The index is now up just 1.47% YTD and is 3.14% off its record close.
Valid until the market close on March 31, 2021.
The S&P 500 closed February with a monthly gain of 2.61% after a loss of 1.11% in January. At this point, after close on the last day of the month, four of five S&P 500 strategies are signaling "invested" — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — unchanged from last month's quadruple "invested" signal.
"Travel on all roads and streets changed by -10.3% (-28.1 billion vehicle miles) for December 2020 as compared with December 2019. Travel for the month is estimated to be 244.1 billion vehicle miles." The 12-month moving average was down 0.98% month-over-month and down 13.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 1.04% month-over-month and down 13.5% year-over-year.
Despite the recent weakness in equities, Raymond James CIO Larry Adam expects positive stock growth over the next 12 months.
We hope you enjoy Harold Evensky's latest NewsLetter.
The Queen’s Gambit miniseries helped propel Netflix to a winning earnings report last quarter, but in fact the chess strategy it is named after has helped propel chess players to winning games for decades.
Inflation is back on investors' minds lately, and some may be wondering how to position their portfolios to confront this potential new scourge.
From cloud computing and automation to self-driving cars, technology continues to be one of the world’s hottest sectors. Our Chief Market Strategist Stephen Dover and Portfolio Managers Donald Huber and John Remmert believe active investing in technology and innovation is a global story, and government support and spending in next-generation technologies is likely a long-term positive.
Even the most promising future can change drastically by a life-threatening event. A healthy individual may require around-the-clock care and supervision after an accident, creating the need to solve complex financial planning problems.
President Biden’s coronavirus stimulus package has the intention of flooding the economy with money at a time when economic growth is sputtering. Ironically, it contains one provision likely to create exactly the opposite of what he intends: raising the national minimum wage from $7.25 to $15.00 per hour.
The February Final came in at 76.8, down 2.2 from the January Final. Investing.com had forecast 76.5. Since its beginning in 1978, consumer sentiment is 10.9 percent below the average reading (arithmetic mean) and 9.9 percent below the geometric mean.
This morning's release of the publicly available data from ECRI puts the WLI at 153.2, up 3.6 from the previous week's revised figure. The WLIg is at 22.1, up from last week and the WLI YoY is at 1.43, up from last week.
The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, fell to 59.5 in February from 63.8 in January, which is in expansion territory. Values above 50.0 indicate expanding manufacturing activity.
Personal Income (excluding Transfer Receipts) in January fell 0.14% and is down 0.6% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down 0.48%. The real number is down 2.0% year-over-year.
The rout in popular technology shares accelerated after the 10-year Treasury rate spiked as much as 23 points, fueling worry that the Federal Reserve will be forced to raise interest rates.
With the release of this morning's report on January Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 11.33% month-over-month change in disposable income is cut to 10.95% when we adjust for inflation. This is an increase from last month's 0.55% nominal and 0.18% real increases last month. The year-over-year metrics are 14.38% nominal and 12.74% real. Increases can be attributed to the second round of funds distributions through the CARES Act.
The BEA's Personal Income and Outlays report for January was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index was up 0.34% month-over-month (MoM) and is up 1.45% year-over-year (YoY). Core PCE is now at 1.53%, below the Fed's 2% target rate.
The latest Conference Board Leading Economic Index (LEI) for January was up 0.5% from the December final figure of 109.7.
Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. The latest average of the five for February is 18.1, up from the previous month's 13.6. It is well below its all-time high of 25.1, set in May 2004.
Today’s low bond yields and high equity valuations have led many to jettison the traditional 4% initial safe-withdrawal rate assumption. But I will show that the optimal “safe” withdrawal rate depends considerably on the retiree.
Rather than worrying about the prospects of higher long-term expected inflation, the US Federal Reserve is exuding confidence that it can maintain price stability should the need ever arise. It should think again, before the inflation genie has escaped from the bottle.
The Second Estimate for Q4 GDP, to one decimal, came in at 4.1% (4.09% to two decimal places), a decrease from 33.4% (33.444% to two decimal places) for the Q3 Third Estimate and a slight increase from the Q4 Advance Estimate of 4.0%. Investing.com had a consensus of 4.2%.
The Great Inflation of the 1960s and 70s, the earliest stages of which were already underway when Graham spoke at the St. Francis Hotel, eventually produced some of the most astonishing economic dislocations in U.S. history.
More than 90% of investors believe the economy will be more robust in 2021, with a consensus it’s a V-shape recovery. For the first time since January 2020, chief investment officers want to increase capital spending rather than improve balance sheets.
Today the National Association of Realtors released the January data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales took a step backward in January as inventory constraints continue to hold back prospective buyers."
Target date funds should be designed to reduce the risk of rash selling.
The latest index came in at 24, up 7 from last month's 17, which indicates expansion in February. The future outlook increased to 34 this month from 24. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.
This morning's seasonally adjusted 730K new claims, down 111K from the previous week's downwardly revised figure, was much better than the Investing.com forecast of 838K.
The unprecedented $9 trillion rescue mission by central banks to haul the world economy from its coronavirus recession is being tested as rising bond yields and inflation bets threaten their ability to keep borrowing costs down.
Tencent Holdings Ltd.-backed Yuanfudao is seeking fresh funding at a valuation of more than $20 billion, people familiar with the matter said, as the cash-burning battle in China’s online education arena shows no sign of abating.
Increased marital stress is highlighting the financial challenges divorce brings, especially to women.
This morning's release of the January New Home Sales from the Census Bureau came in at 923K, up 4.3% month-over-month from a revised 885K in December. The Investing.com forecast was for 855K. The median home price is now at $346K.
A large fiscal package geared toward pandemic relief will likely boost U.S. growth even further in 2021, but long-term inflationary risks are still balanced.
Casualties are piling up across the stock market as bond yields rise.
The biggest slide in months for Cathie Wood’s funds is testing the resolve of investors who plowed billions of dollars into one of the hottest firms on Wall Street.
The GMO Asset Allocation Team has released its latest 7-Year Asset Class Forecasts through January 2021.
Looking at the latest economic data reveals V-shaped recoveries in many goods-based indicators; while services has more catch-up to do.
Before his death on February 6, George P. Shultz, a former US Secretary of the Treasury and Secretary of State, co-authored a final commentary warning of the dangers posed by the vast increase in US government spending in recent years, including during the COVID-19 crisis.
Calls of a market bubble might indicate low returns over the next 5-10 years, but not all equities are overvalued. The S&P 500 has been led higher by just a handful of companies that make up a large percentage of the index, and companies that have lagged may now provide better risk-adjusted returns as the economy recovers. We highlight some of the valuation metrics that look stretched and some thoughts on tactical allocation ideas.
With today's release of the December S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index saw a 1.25% increase month over month which is cut to 1.1% with inflation adjustment. The non-seasonally adjusted national index saw a 10.4% YoY increase.
The headline number of 91.3 was an increase from the final reading of 88.9 for January. This was above the Investing.com consensus of 90.0.
Fifth District manufacturing activity showed continued growth in February, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite index remained at 14 in February and indicates expansion.
For bond investors, inflation is pretty much all bad news, eating into the value of future returns. For equity traders, the tidings can be less categorically awful, given the ability of certain companies to wring profits from higher prices.
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for December. U.S. house prices were up 1.1 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 11.4% on a non-seasonally adjusted nominal basis. After adjusting for inflation and seasonality, the index is up 0.82% in December and up 10.22% year-over-year (seasonally adjusted).
The obstacles to higher yields in the world’s biggest debt market are slowly melting away.
As of February 15, the price of Regular and Premium were up twelve and thirteen cents, respectively, from the previous week and have risen for the 13th consecutive week. According to GasBuddy.com, California has the highest average price for Regular at $3.57 and Mississippi has the cheapest at $2.27. The WTIC end of day spot price closed at 61.70, up 2.7% from the last week.
U.S. stocks have the highest CAPE ratio of any global equity market, but they are still the place to invest. But the inventor of that metric, Robert Shiller, says that stocks are indeed risky.
Things are looking up for the US economy. Later this week we'll get an update on real GDP growth for the 4th quarter of 2020. We estimate that'll be revised up to a 4.3% annual rate of growth from a prior estimate of 4.0%.
The Chicago Fed's National Activity Index, which we reported on this morning, is based on 85 economic indicators drawn from four broad categories of data:
This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for February. The latest general business activity index came in at 17.2, up 10.2 from 7 in January. All figures are seasonally adjusted.
The details of the January Producer Price Index showed a further surge in prices of raw materials. Breakeven inflation rates (the yield spread between inflation-adjusted Treasuries and fixed-rate Treasuries) have continued to move higher.
Political change, continued fiscal support will drive municipal markets in 2021, although outcomes are likely to vary.
What a week for price data! We have been writing about the possibility of higher inflation for months now, most recently here. We have also highlighted the most likely assets to benefit from higher inflation like copper, oil and energy stocks.
Weighing the costs of global vaccine access, minimum wage and the energy rally.
Congressional leaders are aiming to pass a $1.9 trillion fiscal stimulus package by mid-March. This approach is not without risks.
Investment managers produce annual equity return forecasts, and the consensus is much more pessimistic than that of academics. I’ll take a closer look at why the forecasts are so different and the implications for advisors working with clients.
Led by improvements in personal consumption-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.66 in January from +0.41 in December. All four broad categories of indicators used to construct the index made positive contributions in January, but three categories decreased from December. The index’s three-month moving average, CFNAI-MA3, decreased to +0.47 in January from +0.60 in December
Many investors think there are only two options in a market where participants have become overly exuberant, either 'I want in' or 'Get me out.' Our strategies are more nuanced, and we believe fit better with what we expect to transpire.
Rather than going deep into one theme, this week we will do a “Random Thoughts” from the Frontline. Today we will cover several topics in shorter form: valuations, infrastructure, the debacle in Texas, and a lot more.
Millions of Texans were without power this week when the state was hit with a record setting winter storm. An overhaul of its aging infrastructure would require massive amounts of metals and other materials, which would be positive for miners and producers.
The yield on the 10-year note ended February 19, 2021, at 1.34%, the 2-year note ended at 0.11%, and the 30-year at 2.14%.
The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-December, are now available.
In late 2020, a new kid emerged on the bargain-of-the-decade block. UK stocks, and notably UK value, reached very cheap levels relative to value stocks in other developed economies. Today, UK value remains at remarkably low valuations relative to most of its fundamentals.
A strong economic rebound is expected towards the middle of the year, followed by a return to more normal growth in 2022.
Apart from some high-profile downgrades, the muni credit markets finished 2020 buoyed by breakthrough vaccines and signs that state and local tax collections were better than anticipated.
Jerome Powell enters the final year of his term as Federal Reserve chair enjoying the support of labor unions with influence in Joe Biden’s White House, an advantage as the administration prepares to decide later this year whether to reappoint the central bank chief.
The U.S. economy is starting to display pockets of price pressures, further stoking the debate among economists and market participants over the future path of inflation.
This morning's release of the January Existing-Home Sales showed that sales rose to a seasonally adjusted annual rate of 6.69 million units from the previous month's revised 6.65 million. The Investing.com consensus was for 6.61 million. The latest number represents a 0.6% increase from the previous month.
Month-over-month nominal sales in January increased by 5.3%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 5%.
FINRA has released new data for margin debt, now available through January. The latest debt level is up 2.6% month-over-month and is at a record high.
It’s tempting these days for some investors to question the role of fixed income in portfolios. After all, real yields have plunged, potentially leading to less income today and smaller capital gains tomorrow.
For a variety of reasons, many investors are worried about higher inflation. While we may see reflation (a pickup in prices that were restrained due to the pandemic), a significant increase in underlying inflation appears unlikely.
We expect US core inflation to surge in the months ahead, as comparisons to low price levels of a year ago cause sizable fluctuations. Ultimately, supply should respond to recovering demand, bringing inflation down and facilitating easy Fed policy.
I offer 15 explanations for the bubble in stock prices and a single explanation for the one in bond prices. Those bubbles could deflate for any of 10 reasons I also identify, severely diminishing the retirement savings of baby boomers.
Economic Insights
The Inflation Trade Anew
As the inflation discussion continues to gather momentum, please join guest speakers VanEck Portfolio Managers Shawn Reynolds and Roland Morris, Deputy Portfolio Manager Charles Cameron, and sector specialists Veronica Zhang from VanEck’s natural resource equity and commodity strategies.
It seems like it’s been awhile since there’s been such a strong alignment in commodities and natural resources, from tailwinds associated with the global recovery to strong fundamentals, valuations and growth prospects across industries at a company level. The VanEck team will guide you through an in-depth look at the latest trends, their implications and potential opportunities with an overview on our diverse solutions available to access this space.
Emerging Markets in 2021: The Case for Increasing Exposure Now
The weak dollar, low-interest rates, and accelerating growth—these are just three of an array of factors that argue in favor of increasing your clients exposure to emerging markets.
Join us Wednesday, March 10, for a review of EM investment opportunities. Headlining our webcast panel will be Calamos Founder, Chairman, and Global Chief Investment Officer John P. Calamos, Sr. Joining John will be:
In addition to covering secular growth themes (monetary and fiscal stimulus, China’s global leadership, growth and inflation expectations, the weaker dollar, and strengthening liquidity), you’ll hear the Calamos’ take on several thematic tailwinds driving the EM opportunity, including:
We’ll conclude our discussion with a review of the differentiated approach of Calamos Evolving World Growth Fund (CNWIX), which has successfully pursued a favorable risk/reward skew through bottom-up security selection, top-down thematic analysis, and opportunistic use of less-well-known asset classes, such as convertible securities.
CPI and PCE: Two Measures of Inflation and Fed Policy
The BEA's Core Personal Consumption Expenditures Chain-type Price Index for January, released last week, shows that core inflation is below the Federal Reserve's 2% long-term target at 1.53%. The January Core Consumer Price Index release is currently lower, at 1.41%. The Fed is on record as using Core PCE data as its primary inflation gauge.
Message from the Recent Bond Market Turmoil
The late-February spike in U.S. Treasury bond yields sent ripples throughout the global markets. As yields surged to the highest level in a year, stocks and commodities sold off sharply, while the dollar rallied.
As Retirement Income Needs Grow, DC Plan Sponsors Weigh Solutions
As more plan participants worry about retirement income security, demand for guaranteed income solutions is growing—and plan sponsors are pondering the options.
Coming Out of COVID-19: A Look at Interest Rates and Inflation in Europe
There is hope that economies will see a more sustainable and robust recovery this year, given unprecedented levels of monetary and fiscal stimulus and as more individuals are vaccinated against COVID-19. But one question for investors is what happens next—will inflation and higher interest rates be a consequence?
Are Inflation Fears Justified?
In the near term, markets should not be too worried about a possible spike in demand driving up inflation and interest rates, causing asset prices to fall across the board. But longer-term inflation risks are skewed much more to the upside than many investors and policymakers seem to realize.
Economic Commentary: Long-Term Growth, Tourism, Bankruptcies
How long will the effects of COVID be felt in potential growth, the tourism sector and bankruptcy filings?
A Perspective on Secular Bull and Bear Markets
Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Are we in the beginning stages of another secular bear?
February ISM Manufacturing Index: Continued Expansion
This morning the Institute for Supply Management published its monthly Manufacturing Report for February. The latest headline Purchasing Managers Index (PMI) was 60.8, an increase of 2.1 from 58.7 the previous month and in expansion territory. Today's headline number was above the Investing.com forecast of 58.8 percent.
February Markit Manufacturing: "Production growth near six-year peak but price gauge highest since 2011"
The February US Manufacturing Purchasing Managers' Index conducted by Markit came in at 58.6, down 0.6 from the 59.2 final January figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
How to Illustrate Planning Risks to Clients
Clients face three big risks in retirement from the sequence of returns, volatility and asset shortfalls. Michael Hirthler, the founder and chief investment officer at Pennsylvania-based Jacobi Capital Management, explained to me how he uses the Big Picture app to explain those risks to his clients.
Crestmont Market Valuation Update: February 2020
Quick take: Based on the February S&P 500 average of daily closes, the Crestmont P/E is 166% above its arithmetic mean and at the 100th percentile of this fourteen-plus-decade monthly metric.
Powell Changes The Rules On QE
The markets took a tumble to start this week as rising interest rates and inflationary pressures begin to weigh on outlooks. Those worries quickly diminished as Jerome Powell changed the rules to reassure Wall Street that “QE” is here to stay.
Government Bond Yields Have Surged, but Real Yields Are at Zero
Yields have jumped so much, in fact, that they’re giving stocks a serious run for their money. The 10-year yield is now higher than the S&P 500 dividend yield, which may have added to the selling pressure that cost stocks close to 2.5% yesterday.
The Great Jobs Reset
What normalcy will it be? I don’t expect to simply go back to the way things were. The economy as it was structured in December 2019 is gone forever. The world is different now. The economy will be different, too.
S&P 500 Snapshot: Down 0.5% from Thursday
The S&P 500 dropped three out of the five days this week, ending Friday down 0.48% from Thursday. The index is now up just 1.47% YTD and is 3.14% off its record close.
February Moving Averages: Up 2.6% from January
Valid until the market close on March 31, 2021.
The S&P 500 closed February with a monthly gain of 2.61% after a loss of 1.11% in January. At this point, after close on the last day of the month, four of five S&P 500 strategies are signaling "invested" — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — unchanged from last month's quadruple "invested" signal.
America's Driving Habits as of December 2020
"Travel on all roads and streets changed by -10.3% (-28.1 billion vehicle miles) for December 2020 as compared with December 2019. Travel for the month is estimated to be 244.1 billion vehicle miles." The 12-month moving average was down 0.98% month-over-month and down 13.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 1.04% month-over-month and down 13.5% year-over-year.
Treasury Auction Results Spark Drop in U.S. Stock Prices
Despite the recent weakness in equities, Raymond James CIO Larry Adam expects positive stock growth over the next 12 months.
NewsLetter - February 2021
We hope you enjoy Harold Evensky's latest NewsLetter.
The Queen’s Gambit Declined
The Queen’s Gambit miniseries helped propel Netflix to a winning earnings report last quarter, but in fact the chess strategy it is named after has helped propel chess players to winning games for decades.
Inflation Is Coming for Your Wealth. Here's What Investors Can Do About It
Inflation is back on investors' minds lately, and some may be wondering how to position their portfolios to confront this potential new scourge.
The Birth of Global Tech Continues
From cloud computing and automation to self-driving cars, technology continues to be one of the world’s hottest sectors. Our Chief Market Strategist Stephen Dover and Portfolio Managers Donald Huber and John Remmert believe active investing in technology and innovation is a global story, and government support and spending in next-generation technologies is likely a long-term positive.
He May Never Walk Again
Even the most promising future can change drastically by a life-threatening event. A healthy individual may require around-the-clock care and supervision after an accident, creating the need to solve complex financial planning problems.
The Minimum Wage and the Cost of Living
President Biden’s coronavirus stimulus package has the intention of flooding the economy with money at a time when economic growth is sputtering. Ironically, it contains one provision likely to create exactly the opposite of what he intends: raising the national minimum wage from $7.25 to $15.00 per hour.
Michigan Consumer Sentiment: February Final Slightly Lower
The February Final came in at 76.8, down 2.2 from the January Final. Investing.com had forecast 76.5. Since its beginning in 1978, consumer sentiment is 10.9 percent below the average reading (arithmetic mean) and 9.9 percent below the geometric mean.
ECRI Weekly Leading Index Update
This morning's release of the publicly available data from ECRI puts the WLI at 153.2, up 3.6 from the previous week's revised figure. The WLIg is at 22.1, up from last week and the WLI YoY is at 1.43, up from last week.
Chicago PMI Slipped in February
The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, fell to 59.5 in February from 63.8 in January, which is in expansion territory. Values above 50.0 indicate expanding manufacturing activity.
The Big Four: Real Personal Income in January
Personal Income (excluding Transfer Receipts) in January fell 0.14% and is down 0.6% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down 0.48%. The real number is down 2.0% year-over-year.
Ten-Year Rate Spike Sinks Tesla and ARKK, Deepening Tech Carnage
The rout in popular technology shares accelerated after the 10-year Treasury rate spiked as much as 23 points, fueling worry that the Federal Reserve will be forced to raise interest rates.
Real Disposable Income Per Capita in January, CARES Act 2.0
With the release of this morning's report on January Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 11.33% month-over-month change in disposable income is cut to 10.95% when we adjust for inflation. This is an increase from last month's 0.55% nominal and 0.18% real increases last month. The year-over-year metrics are 14.38% nominal and 12.74% real. Increases can be attributed to the second round of funds distributions through the CARES Act.
PCE Price Index: January Core at 1.53%
The BEA's Personal Income and Outlays report for January was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index was up 0.34% month-over-month (MoM) and is up 1.45% year-over-year (YoY). Core PCE is now at 1.53%, below the Fed's 2% target rate.
CB Leading Economic Index: LEI and CEI Up in January
The latest Conference Board Leading Economic Index (LEI) for January was up 0.5% from the December final figure of 109.7.
February Regional Fed Manufacturing Overview
Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. The latest average of the five for February is 18.1, up from the previous month's 13.6. It is well below its all-time high of 25.1, set in May 2004.
Retirement Planning in the Post-4% World
Today’s low bond yields and high equity valuations have led many to jettison the traditional 4% initial safe-withdrawal rate assumption. But I will show that the optimal “safe” withdrawal rate depends considerably on the retiree.
Pulling Up the Inflation Anchor
Rather than worrying about the prospects of higher long-term expected inflation, the US Federal Reserve is exuding confidence that it can maintain price stability should the need ever arise. It should think again, before the inflation genie has escaped from the bottle.
Q4 GDP Second Estimate: Real GDP at 4.1%
The Second Estimate for Q4 GDP, to one decimal, came in at 4.1% (4.09% to two decimal places), a decrease from 33.4% (33.444% to two decimal places) for the Q3 Third Estimate and a slight increase from the Q4 Advance Estimate of 4.0%. Investing.com had a consensus of 4.2%.
This Era May Come to Be Remembered as the Federal Reserve’s Third Great Mistake
The Great Inflation of the 1960s and 70s, the earliest stages of which were already underway when Graham spoke at the St. Francis Hotel, eventually produced some of the most astonishing economic dislocations in U.S. history.
The Only Reason To Be “Bearish” Is “No One Is Bearish”
More than 90% of investors believe the economy will be more robust in 2021, with a consensus it’s a V-shape recovery. For the first time since January 2020, chief investment officers want to increase capital spending rather than improve balance sheets.
Pending Home Sales Retreat in January
Today the National Association of Realtors released the January data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales took a step backward in January as inventory constraints continue to hold back prospective buyers."
What the Pandemic Taught Us About Target Date Funds
Target date funds should be designed to reduce the risk of rash selling.
Kansas City Fed Survey: Manufacturing Climbed Higher in February
The latest index came in at 24, up 7 from last month's 17, which indicates expansion in February. The future outlook increased to 34 this month from 24. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.
Weekly Unemployment Claims: Down 111K, Beats Forecast
This morning's seasonally adjusted 730K new claims, down 111K from the previous week's downwardly revised figure, was much better than the Investing.com forecast of 838K.
Powell Goes Easy on Surging Yields While Central Bank Peers Fret
The unprecedented $9 trillion rescue mission by central banks to haul the world economy from its coronavirus recession is being tested as rising bond yields and inflation bets threaten their ability to keep borrowing costs down.
Tencent-Backed Edtech Startup Seeks Funding at $20 Billion Value
Tencent Holdings Ltd.-backed Yuanfudao is seeking fresh funding at a valuation of more than $20 billion, people familiar with the matter said, as the cash-burning battle in China’s online education arena shows no sign of abating.
The Pandemic Has Exposed the Gap in Women’s Financial Needs
Increased marital stress is highlighting the financial challenges divorce brings, especially to women.
New Home Sales Up 4.3% in January
This morning's release of the January New Home Sales from the Census Bureau came in at 923K, up 4.3% month-over-month from a revised 885K in December. The Investing.com forecast was for 855K. The median home price is now at $346K.
Fiscal Spending Could Cause a U.S. Growth Spike – Compounding Investors’ Concerns on Inflation
A large fiscal package geared toward pandemic relief will likely boost U.S. growth even further in 2021, but long-term inflationary risks are still balanced.
SPAC, Hedge Fund, Growth Stock Pain Builds in $1 Trillion Rout
Casualties are piling up across the stock market as bond yields rise.
Cathie Wood Fan Club Faces Big Test as Ark Funds Extend Rout
The biggest slide in months for Cathie Wood’s funds is testing the resolve of investors who plowed billions of dollars into one of the hottest firms on Wall Street.
GMO 7-Year Asset Class Forecast: January 2021
The GMO Asset Allocation Team has released its latest 7-Year Asset Class Forecasts through January 2021.
EleVation: Some V-Shaped Economic Data to Cheer
Looking at the latest economic data reveals V-shaped recoveries in many goods-based indicators; while services has more catch-up to do.
Project Syndicate
Before his death on February 6, George P. Shultz, a former US Secretary of the Treasury and Secretary of State, co-authored a final commentary warning of the dangers posed by the vast increase in US government spending in recent years, including during the COVID-19 crisis.
Risks of High Equity Valuations Present Tactical Opportunities
Calls of a market bubble might indicate low returns over the next 5-10 years, but not all equities are overvalued. The S&P 500 has been led higher by just a handful of companies that make up a large percentage of the index, and companies that have lagged may now provide better risk-adjusted returns as the economy recovers. We highlight some of the valuation metrics that look stretched and some thoughts on tactical allocation ideas.
December S&P/Case-Shiller Home Price Index: National Index up 10.4% YoY NSA
With today's release of the December S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index saw a 1.25% increase month over month which is cut to 1.1% with inflation adjustment. The non-seasonally adjusted national index saw a 10.4% YoY increase.
Consumer Confidence Up in February
The headline number of 91.3 was an increase from the final reading of 88.9 for January. This was above the Investing.com consensus of 90.0.
Richmond Fed Manufacturing: Continued Improvement in February
Fifth District manufacturing activity showed continued growth in February, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite index remained at 14 in February and indicates expansion.
Inflation Angst Is About to Rewrite the Stock Market Playbook
For bond investors, inflation is pretty much all bad news, eating into the value of future returns. For equity traders, the tidings can be less categorically awful, given the ability of certain companies to wring profits from higher prices.
FHFA House Price Index: Up 1.1% in December
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for December. U.S. house prices were up 1.1 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 11.4% on a non-seasonally adjusted nominal basis. After adjusting for inflation and seasonality, the index is up 0.82% in December and up 10.22% year-over-year (seasonally adjusted).
The Runway Toward Higher Treasury Yields Looks Free and Clear
The obstacles to higher yields in the world’s biggest debt market are slowly melting away.
Weekly Gasoline Prices: Regular and Premium Up Again
As of February 15, the price of Regular and Premium were up twelve and thirteen cents, respectively, from the previous week and have risen for the 13th consecutive week. According to GasBuddy.com, California has the highest average price for Regular at $3.57 and Mississippi has the cheapest at $2.27. The WTIC end of day spot price closed at 61.70, up 2.7% from the last week.
Robert Shiller: U.S. Equities are Still the Place to Invest
U.S. stocks have the highest CAPE ratio of any global equity market, but they are still the place to invest. But the inventor of that metric, Robert Shiller, says that stocks are indeed risky.
Overstimulation on the Way
Things are looking up for the US economy. Later this week we'll get an update on real GDP growth for the 4th quarter of 2020. We estimate that'll be revised up to a 4.3% annual rate of growth from a prior estimate of 4.0%.
CFNAI Components: Employment, Production, Consumption, Sales
The Chicago Fed's National Activity Index, which we reported on this morning, is based on 85 economic indicators drawn from four broad categories of data:
February Dallas Fed Manufacturing
This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for February. The latest general business activity index came in at 17.2, up 10.2 from 7 in January. All figures are seasonally adjusted.
The Inflation Outlook, Part 2
The details of the January Producer Price Index showed a further surge in prices of raw materials. Breakeven inflation rates (the yield spread between inflation-adjusted Treasuries and fixed-rate Treasuries) have continued to move higher.
Municipal Bond Outlook: Recovering at Different Speeds
Political change, continued fiscal support will drive municipal markets in 2021, although outcomes are likely to vary.
Inflation Here, There and Everywhere
What a week for price data! We have been writing about the possibility of higher inflation for months now, most recently here. We have also highlighted the most likely assets to benefit from higher inflation like copper, oil and energy stocks.
Vaccine Nationalism, Minimum Wage, Rising Energy Prices
Weighing the costs of global vaccine access, minimum wage and the energy rally.
Fiscal Policy: Veering Left and Moving Fast
Congressional leaders are aiming to pass a $1.9 trillion fiscal stimulus package by mid-March. This approach is not without risks.
Are Equity Return Forecasts Too Pessimistic?
Investment managers produce annual equity return forecasts, and the consensus is much more pessimistic than that of academics. I’ll take a closer look at why the forecasts are so different and the implications for advisors working with clients.
Chicago Fed: "Index suggests economic growth increased in January"
Led by improvements in personal consumption-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.66 in January from +0.41 in December. All four broad categories of indicators used to construct the index made positive contributions in January, but three categories decreased from December. The index’s three-month moving average, CFNAI-MA3, decreased to +0.47 in January from +0.60 in December
Spectate or Speculate
Many investors think there are only two options in a market where participants have become overly exuberant, either 'I want in' or 'Get me out.' Our strategies are more nuanced, and we believe fit better with what we expect to transpire.
Random Thoughts from the Frontline
Rather than going deep into one theme, this week we will do a “Random Thoughts” from the Frontline. Today we will cover several topics in shorter form: valuations, infrastructure, the debacle in Texas, and a lot more.
Texas Freezes, but a New Commodities Supercycle Could Be Heating Up
Millions of Texans were without power this week when the state was hit with a record setting winter storm. An overhaul of its aging infrastructure would require massive amounts of metals and other materials, which would be positive for miners and producers.
Treasury Snapshot: 10-Year Note at 1.34%
The yield on the 10-year note ended February 19, 2021, at 1.34%, the 2-year note ended at 0.11%, and the 30-year at 2.14%.
Gasoline Volume Sales Down 15% from All-Time High
The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-December, are now available.
How COVID-19 Vaccines and Brexit Create the Trade of the 2020s
In late 2020, a new kid emerged on the bargain-of-the-decade block. UK stocks, and notably UK value, reached very cheap levels relative to value stocks in other developed economies. Today, UK value remains at remarkably low valuations relative to most of its fundamentals.
Emerging From The Shadows
A strong economic rebound is expected towards the middle of the year, followed by a return to more normal growth in 2022.
COVID 19 Disrupts Municipalities—Will Taxing Millionaires Accelerate Outmigration?
Apart from some high-profile downgrades, the muni credit markets finished 2020 buoyed by breakthrough vaccines and signs that state and local tax collections were better than anticipated.
Powell’s Approach to Recovery, Inflation Will Test Union Loyalty
Jerome Powell enters the final year of his term as Federal Reserve chair enjoying the support of labor unions with influence in Joe Biden’s White House, an advantage as the administration prepares to decide later this year whether to reappoint the central bank chief.
U.S. Price Pressures Percolate With Surging Sales, Input Costs
The U.S. economy is starting to display pockets of price pressures, further stoking the debate among economists and market participants over the future path of inflation.
Existing-Home Sales Up 0.6% in January
This morning's release of the January Existing-Home Sales showed that sales rose to a seasonally adjusted annual rate of 6.69 million units from the previous month's revised 6.65 million. The Investing.com consensus was for 6.61 million. The latest number represents a 0.6% increase from the previous month.
The Big Four: January Real Retail Sales Up 5.3%
Month-over-month nominal sales in January increased by 5.3%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 5%.
Margin Debt and the Market: Up 2.6% in January, Continues Record Trend
FINRA has released new data for margin debt, now available through January. The latest debt level is up 2.6% month-over-month and is at a record high.
Fixed Income: Low Yields Don’t Tell the Whole Story
It’s tempting these days for some investors to question the role of fixed income in portfolios. After all, real yields have plunged, potentially leading to less income today and smaller capital gains tomorrow.
The Inflation Outlook
For a variety of reasons, many investors are worried about higher inflation. While we may see reflation (a pickup in prices that were restrained due to the pandemic), a significant increase in underlying inflation appears unlikely.
Four Things Investors Should Know About US Inflation in 2021
We expect US core inflation to surge in the months ahead, as comparisons to low price levels of a year ago cause sizable fluctuations. Ultimately, supply should respond to recovering demand, bringing inflation down and facilitating easy Fed policy.
15 Explanations for the Bubble in Stock Prices
I offer 15 explanations for the bubble in stock prices and a single explanation for the one in bond prices. Those bubbles could deflate for any of 10 reasons I also identify, severely diminishing the retirement savings of baby boomers.