● Mastering the Market Cycle: Getting the Odds on Your Side
By Howard Marks
Adapted excerpt via Bloomberg
Every once in a while, when the economy and the markets are humming, there arises another belief that things are now different: that cycles have been put to an end, such that we no longer have to worry about the upswing turning into a downswing. For example, in pre-Depression 1929, an auto company president declared, “There will be no interruption of our present prosperity.” In 1996, while the tech bubble was building, the Wall Street Journal reported, “The big, bad business cycle has been tamed.” And former Treasury Secretary and New York Federal Reserve President Tim Geithner wrote in his autobiography, “Stress Test: Reflections on Financial Crises,” that in 2003, on the way to the global financial crisis, “There was growing confidence that [financial innovations and better monetary policy] had made devastating crises a thing of the past.”
In other words, the assumption was that good times in the economy can roll on forever; assets can appreciate without end; and investors needn’t worry about a correction, bear market or crash. Such “different-this-time” thinking is sorely wrong and potentially dangerous.
Continue reading →

Private payrolls in the US increased 121,000 in September, well below Econoday.com’s consensus forecast for a 175,000 gain. Last month’s advance was also dramatically weaker than August’s revised surge of 254,000, according to this morning’s release from the Labor Dept. Despite the surprisingly softer report, the year-over-year trend ticked up to 2.0%, a two-year high.
Continue reading →

Yesterday’s sharp selloff in US stocks delivered haircuts far and wide, but the setback left growth and momentum factors in the lead for year-to-date equity performance, based on a set of exchange-traded funds (ETFs). While large-cap value suffered the smallest loss in yesterday’s rout among the major equity factor buckets, this slice of US equities remains in last place in 2018 through yesterday’s close (Oct. 4).
Continue reading →

Republicans say FBI report exonerates Kavanaugh, paves way for vote: WaPo
Rising bond yields in US are weighing on markets around the world: Reuters
Tech stocks in US slump to 15-month low: Bloomberg
Emerging-market stocks headed for worst weekly loss since Feb: Reuters
Economists expect a solid gain in today’s US jobs report for September: Reuters
US job cuts up sharply in Sep to second-highest monthly print this year: CG&C
August factory orders in US post biggest gain in 11 months: Reuters
10yr Treasury yield continued rising on Thurs, reaching 3.19%–highest since 2011:

If there was any doubt that a regime of rising interest rates has arrived, the Treasury market on Wednesday dispatched a wake-up call.
Continue reading →

Federal judge blocks deportations planned by Trump adminstration: USA Today
Vice President Pence set to give provocative speech on China: CNN
FBI delivered Kavanaugh report to White House: Reuters
Key Kavanaugh vote in Senate set for Friday: The Hill
Fed chief: US expansion can continue ‘for quite some time’: Bloomberg
Global growth slowed to 2-year low in Sep, according to PMI data: IHS Markit
ADP: US companies added 230,000 jobs in Sep, most since Feb: MW
ISM Non-Mfg Index jumped to 21-year high in September: Reuters
Services PMI slipped to 8-month low in Sep: IHS Markit
10-year Treasury yield spiked to seven-year high: 3.15%: CNBC

Economic output for the US is on track to post a slower-but-still-healthy gain in the preliminary GDP report for the third quarter that’s scheduled for publication later this month. The outlook is based on a set of nowcasts compiled by The Capital Spectator. The median Q3 estimate: a 3.2% increase, unchanged from the analysis in mid-September.
Continue reading →

FBI’s investigation of Kavanaugh may end today: Fox
Senate GOP looking to schedule Kavanaugh vote this week: The Hill
Investigation reveals tax-dodging schemes enriched Trump: NY Times
NY launches investigation into Trump’s taxes after NY Times story: MW
US NATO rep: US may ‘take out” Russian missiles if Moscow violates treaty: CNN
Fed Chair Powell: US economy in “remarkably positive” period: WaPo
India’s currency falls to record low: CNBC
RBC survey: 90% of investors say ESG portfolios match/beat non-ESG: P&I
Small-cap stocks (Russell 2000 Index) fell to 2-month low on Tuesday:

The expected risk premium for the Global Market Index (GMI) was unchanged in September, holding steady at an annualized 5.0% — matching the estimate in the previous month. The performance forecast for GMI (an unmanaged market-value-weighted portfolio that holds all the major asset classes) reflects the premium over the projection for the “risk-free” rate for the long run.
Continue reading →

Key differences in Trump’s replacement for Nafta: CNBC
Trump appears set for protracted economic war with China: Bloomberg
US Navy reports ‘unsafe’ encounter with a Chinese warship: CNN
US air strikes in Somalia target militants: Reuters
McConnell: Senate to vote on Kavanaugh’s nomination this week: The Hill
US construction spending up 0.1% in Aug, led by public sector: MW
ISM Mfg Index for US slipped in Sep after 14-year high the month before: CNBC
US Mfg PMI rose to 4-month high in Sep: IHS Markit
WTI crude oil jumps to four-year high: MW