● Empire of the Fund: The Way We Save Now
By William A. Birdthistle
Summary via publisher (Oxford University Press)
Empire of the Fund is an exposé and examination of the way we save now. With the rise of the 401(k) and demise of the pension, the United States has embarked upon the richest and riskiest experiment in our financial history. Over the next twenty years, nearly eighty million baby boomers will retire at a pace of ten thousand per day. The hypothesis of our experiment is that millions of ordinary, untrained, busy citizens can successfully manage trillions of dollars in a financial system dominated by wealthy, skilled, and powerful financial institutions, many of which have a record of treating individual investors shabbily.
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The pace of employment growth at US companies bounced back sharply in June after slumping to a five-year low in May, the Labor Department reports. The gain, which beat expectations by a wide margin, suggests that the economy is stronger than the May release implied. But note that the year-over-year gain in private payrolls, although fractionally higher, is essentially unchanged from May, holding close to a three-year low. In sum, there’s still no smoking gun for arguing that the US slipped into a new NBER-defined recession, but the weak numbers from other corners of the economy—industrial production, for instance—continue to raise questions about the outlook for this year’s second half.
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The 10-year Treasury yield yesterday took a breather from plumbing new record lows, but it’s not obvious that the 35-year slide in interest rates is over. The benchmark rate ticked up to 1.40% yesterday (July 8) via Treasury.gov’s daily data, a whisker above Monday’s all-time low of 1.37%. All the usual caveats apply for deciding if even lower yields are coming. But if the rest of the world offers a clue (such as the expanding tide of negative rates), it’s premature to bet against a multi-generational trend that’s confounded almost everyone who studies the bond market.
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Private payrolls in the US increased by 172,000 in June, according to this morning’s release of the ADP Employment Report. The gain, although modest by the standards of the last several years, marks the strongest advance since March. But the annual pace of growth dipped to a three-year low, providing more evidence that the labor market’s expansion continues to decelerate.
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After dipping to a record low of 1.37% on Tuesday, the benchmark 10-year Treasury yield ticked higher yesterday (June 6), settling at 1.38%, based on daily data from Treasury.gov. Has the downside bias run its course? The answer awaits in the incoming economic data. Meantime, recent US numbers are sending mixed signals and new questions raised in the post-Brexit world order aren’t helping.
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The expected risk premium for the Global Market Index (GMI) eased in June, dipping for the first time since last December. GMI—an unmanaged market-value weighted mix of the major asset classes—is projected to earn an annualized 3.3% risk premium in the long term, which is slightly below last month’s estimate. (For details on the equilibrium-based methodology that’s used to generate the forecasts each month, see the summary below.)
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June delivered a solid month of gains for most of the major asset classes. Although the Brexit vote late last month took markets on a roller coaster ride, when the dust cleared on June 30 the trend was heavily skewed to the positive column.
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