This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 148.5, up 1.1 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.41%, down from 3.57% last week. The WLI Growth indicator is now at 1.5, also down from the previous week.
The hallmark of an economic Ponzi scheme is that the operation of the economy relies on the constant creation of low-grade debt in order to finance consumption and income shortfalls among some members of the economy, using the massive surpluses earned by other members of the economy. The factors most responsible for today’s lopsided prosperity are exactly the seeds from which the next crisis will spring.
Volatility has had little effect on the long-term performance of equities, and in fact often creates opportunity.
This morning's employment report for June showed a 213K increase in total nonfarm payrolls, which was better than forecasts. The unemployment rate increased to 4.0%. The Investing.com consensus was for 200K new jobs and the unemployment rate to remain at 3.8%.
The accompanying chart is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.
"Travel on all roads and streets changed by -0.2% (-0.5 billion vehicle miles) for April 2018 as compared with April 2017. Travel for the month is estimated to be 272.4 billion vehicle miles." The 12-month moving average was down 0.02% month-over-month and up 0.8% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is down 0.09% month-over-month and down 0.2% year-over-year.
Leading economic indicators have accelerated since morphing from recovery to expansion, so let’s see what that means for the economy and stock market looking ahead.
In this month's Global Economic Perspective, our Fixed Income Group opines on rising energy prices, US Treasury yields, emerging-market currency pressures and global economic growth.
The overall profile of market conditions continues to feature: 1) hypervaluation on the measures we find best-correlated with actual subsequent S&P 500 total returns, coupled with 2) continued deterioration in our measures of market internals, which are the most reliable tools we’ve found to gauge the psychological inclination of investors toward speculation or risk-aversion.
When the Fed instituted ZIRP, investors were overenthusiastic to invest in the next great Unicorn. Now that rates are rising and money is no longer free, investors are beginning to realize that rational investing and positive cash flows trump hype and speculation.