Is it a game-changer? A tipping point? A moment when the economy finally turned a corner for the better in a meaningful way? Possibly. Meantime, one can argue that this is why the stock market has been rallying this year: anticipating better economic news. And we certainly have some in this morning’s weekly update of new filings for unemployment benefits. Initial jobless claims unexpectedly dropped to 284,000 on a seasonally adjusted basis for the week through July 19. That’s the lowest level since February 2006 and a strong sign that the moderately stronger gains in private payrolls in recent months will continue if not accelerate.
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Momentum Has Not Been ‘Overgrazed’: A Visual Overview in 10 Slides
Claude B. Erb | May 10, 2014
The return to “momentum” does not seem to be the victim of “overgrazing”. Conceptually, overgrazing occurs when too much capital chases too few investment opportunities which in turn leads to low returns. The “equity risk premium”, the “size premium” and the “value premium” seem to be getting close to a no-man’s land of return-free risk. A high degree of belief in “the kindness of strangers” could be driving the low equity risk premium, size premium and value premium. A high degree of disbelief in momentum could be driving what appears to be a trend large cap momentum excess return of about 7%.
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