The stock market’s post-election performance starts today. From an equity-risk factor perspective, the horse race begins with high dividend yield in the pole position for year-to-date results, based on a set of ETFs through Tuesday’s close (Nov. 8).
Monthly Archives: November 2022
Macro Briefing: 9 November 2022
* Dems perform better than expected but control of Congress still unclear
* European leaders announce funds to help poor nations with climate change.
* China’s inflation shows signs of easing in October
* China’s ‘Zero-Covid’ guessing game is all about one man: President Xi
* Some investors on Wall Street bet Fed funds rate could rise to 6%
* US inflation expected to cool only slightly in Thursday’s October report
* Binance, world’s largest cryptocurrency firm, agrees to buy rival FTX
* Meta is laying off 13% of staff, or more than 11,000 employees
* US small business sentiment remains depressed in October:
Hedging Interest Rate Risk With Real And Nominal Treasury Yields
Update: the analysis below implies that summing two Treasury yields allows you to earn the summed yield. In fact, that’s not possible. Rather, the point of the article is that summing the two yields offers a timing signal for identifying relatively high payout rates for a strategy of holding a 50-50 mix of TIPS and conventional Treasuries. Apologies for any confusion. –JP
The recent rise in real yields for inflation-indexed Treasuries (TIPS) looks compelling for locking in relatively attractive payout rates, but the usual risks with bonds still applies. That inspires looking at a somewhat unorthodox strategy of holding TIPS and conventional Treasuries as a hedging strategy.
Macro Briefing: 8 November 2022
* Florida’s east coast braces for Tropical Storm Nicole
* Republicans expecting to win back power in Congress after today’s elections
* UN chief outlines stark choice for nations at COP27 climate summit
* China’s Covid controls are still creating headwinds for the economy
* Covid continues to take a toll on US workforce
* Soft landing is still possible for US economy, advises Goldman Sachs
* Consumer confidence in the housing market falls to new low
* US stocks “have always gained a year after midterms” since 1950: LPL Research:
Rebound In Global Markets Turned Mixed Last Week
The recent rally in global markets thinned out last week as commodities and foreign stocks rose while US assets retreated, based on a set of ETF proxies.
Macro Briefing: 7 November 2022
* White House national security adviser held talks with top Russia aides
* Republicans look set to retake House and maybe Senate in Tuesday’s vote
* Florida prepares for a direct hit from Tropical Storm Nicole this week
* China’s exports and imports unexpectedly fell in October
* Goldman Sachs predicts China is ‘months away’ from reopening
* US oil production roughly flat as fracking-related output slows
* Apple’s iPhone shipments delayed due to China Covid lockdown
* Meta reportedly set to announce large-scale layoffs
* US payrolls rose 261k in October, a solid gain but slowest in 22 months:
Book Bits: 5 November 2022
Paul Tucker
Review via The Enlightened Economist
His aim is to bring a mash-up of David Hume and Bernard Williams to the current fraught state of geopolitics and global crises. The book uses the Humean dual of incentives and norms to think about international economic institutions in place of more traditional International Relations perspectives (realism, constructivism…). As long-time readers of this blog will know, I’m a big Hume fan (although confess to not having read Bernard WIlliams since my student days).
The motivating question is whether a legitimate international order can exist in a world transitioning out of the European/Atlantic order and facing complex existential challenges. Specifically, what international economic arrangements can co-exist with current geopolitics and shifts in power?
US Economy Shows More Strength Than Recently Forecast
In early October the near-term outlook for the US business cycle looked mildly grim and output was forecast to turn slightly negative starting in November. But after four weeks the dark estimate reversed and economic activity is again set to stay moderately positive in the immediate future. Recession risk still lurks on the horizon, but for the moment the near-term macro trend has strengthened.
Macro Briefing: 4 November 2022
* North Korea’s provocative run of missile launches continues
* Netanyahu set for return as prime minister of Israel
* German Chancellor Olaf Scholz, in China visit, calls for economic ties ‘as equals’
* US holiday sales expected to rise 6% to 8%, according to an industry forecast
* US factory orders post moderate gain in September
* US jobless claims remain low, highlighting tight labor market
* Services sector contraction in US deepens in October via PMI survey
* US services sector growth slows in October to softest pace in 2-1/2 years:
Fed Pivot Watch: 3 November 2022
In the search for clues on the outlook for monetary policy, investors and analysts are focused on three questions. When will the Fed slow its rate hikes? When will the Fed pause rate hikes? And when will the central bank pivot and start cutting rates? Powell gave somewhat encouraging remarks in one out of three in yesterday’s press conference.