● Fed policymakers maintained a dovish tone in the latest FOMC minutes…
● Consumer credit in the US increased 5.7% in May vs. year ago…
● US mortgage applications increased 4.6% for week through July 3…
● Germany’s trade surplus reached record high in May…
● Greece faces a deadline today for new proposals…
● But is staying in eurozone the bigger risk for Greece?

The IMF this week recommended that the Federal Reserve delay its first hike in interest rates until we see “clear signs of wage and price inflation, and sufficiently strong economic growth.” It’s debatable if those conditions apply, although many analysts say nay at the moment. In any case, sober economic analysis may not matter as long as the Greek crisis stalks the macro landscape.
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● The end game for Greece ends on Sunday…
● And the Greek leader calls for a new deal with Europe…
● Meanwhile, US job openings tick up to a record high in May…
● As Gallup’s US economic confidence index sticks to a 7-month low…
● And the US trade gap in May widened as exports slow amid global headwinds…
● China’s stock market continues to slide…
● A rout that may have implications for economic reforms.

The expected risk premium for the Global Market Index (GMI) dipped in June, falling to its lowest level since January. GMI — an unmanaged, market-value weighted mix of the major asset classes — is projected to earn an annualized 3.6% over the “risk-free” rate in the long term. (For details on the equilibrium-based methodology that’s used to generate the forecasts each month, see the summary below). Today’s updated estimate, which is based on data through the close of last month, slipped 30 basis points from the previous projection.
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● ISM: US services sector posts slightly stronger growth in June…
● But PMI reports “slowest rise in service sector activity for five months”…
● The Fed’s Labor Market Conditions Index still points to weak expansion in June…
● As the Conference Board’s Employment Trends Index accelerated last month…
● Meanwhile, global growth slowed to a 5-month low via PMI data…
● And the debacle in Greece rolls on as the Eurozone awaits a new proposal from the government in Athens

Building “optimal” portfolios—maximizing return and minimizing risk–is a foundational concept in quantitative finance. Unfortunately, it’s not terribly practical. The problem, as many researchers have demonstrated over the years, is the elusive aspect of developing reliable estimates of return and risk. Mere mortals are notoriously ill-suited for such things. But crunching the numbers and identifying theoretically optimal strategies is still useful as a benchmark for thinking about how to design and manage your real-world asset allocation and framing history in a productive way.
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● Greece votes no. Now what?
● For starters, the finance minister resigned…
● French Finance Minister says Greece must now make the first move…
● In any case, Greece will have tough time remaining in the euro…
● Meanwhile, eurozone investor confidence rises…
● And European economic sentiment remains stable…
● But China’s stock market slump adds another risky dimension to summer outlook.

Happy 4th of July! In honor of Uncle Sam’s birthday, The Capital Spectator will refrain from discussions of finance, economics, and otherwise engaging in analytical acrobatics… until the long holiday weekend in the US comes to a close. The standard routine commences anew on Monday, July 6. To paraphrase (and slightly modify) an observation by Thomas Jefferson in a letter to James Madison a few centuries ago, a little rebellion relaxation now and then is a good thing.

● US payrolls post a solid increase in June but wages are flat…
● US jobless claims jumped more than expected last week…
● And US factory orders slumped in May…
● The US consumer comfort index rose last week to its highest level since April…
● Eurozone Composite PMI increased to a 4-year high last month…
● While China’s services sector expands at slowest rate in over a year in June…
● Meanwhile, Europe braces for Greece’s referendum on Sunday on a bailout packaged that expired on Tuesday. Regardless, polling shows the public is evenly split.

Private-sector payrolls rose 223,000 in June, a touch less than expected, based on Econoday.com’s consensus forecast. That’s a respectable gain, but it’s well below the previous month’s 250,000 advance, which was revised lower in today’s release. On its face, the latest results continue to paint an upbeat profile, but the numbers come with caveats, including the mild but ongoing deceleration in the year-over-year increase.
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