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Consumer: Confidence
Low confidence is associated with economic lows or the start of a growth cycle.

Rising from low levels (in this case record low levels), the economy tends to grow handsomely. Growing confidence can be a very good sign.




Growth: LEI
The leading index for each state predicts the six-month growth rate of the state’s coincident index. Coincidence Index, state-level housing permits, state initial unemployment claims, delivery times from ISM, and interest rate spread between the 10-year and 3-month Treasuries.

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CPI vs T-Bills
Short-term rates are historically at least as high as inflation.

Inflation is coming down and rates are heading to a positive ‘real’ level, which is normal. When real rates are too high liquidity shrivels. This is not the case now.




Int Rates: Fed Funds (Real)
When the yield curve is negative, it often predicts recession. However, this typically occurs when “real” (inflation-adjusted) federal funds rate is also clearly positive.

Despite a negative yield curve, the Fed hasn’t raised the funds rates above inflation. Generally both are required for the economy to crash (historically).




Banking: T-Bill v Fed Funds
When negative, Fed Fund rates are higher than 3-month t-bills. This indicates that the Fed is possibly ‘hitting the breaks’ harder than bond market participants.

The Fed hasn’t been too aggressive in raising rates. Historically, this is negative when the Fed acts too fast which precedes difficult times.




Consumer: Liabilities to GDP
Consumer debt levels may be part of a larger narrative regarding the health (and risks) of the consumer.

Households are not over-indebted which is good if we head into a recession.

Consumer: Employees to Working Age Population (chg)
A decline in growth of workforce participation is ominous.

This is one of a few datapoints showing strong-but-weakening employment.




Employment: All employees various sectors
Job growth variance by sector.

While employment is strong, it is weakening from higher levels. Retail employment appears close to recession levels.




Banking: Money Demand (M2/GDP)
High levels indicate high spending potential. Declining levels indicate money is being spent and inflation may rise (and visa versa).

As money growth falls, so too does economic growth – and so this is pressuring the current growth cycle.




Inflation: M2 vs. Nom GDP growth (M2>GDP is disinflationary)
When the supply of money is growing, it is not being spent and inflation is lower. However, when money is being spent the supply shrinks and inflation often rises.

As money growth falls, so too does economic growth – and so this is pressuring the current growth cycle.




Business: Corp Profits vs. GDP
Over the long-run, businesses grow profits at about the same rate as nominal economic growth.

Excess profits are falling in line with trend.




Business: Proprietors’ margin
Margins decline with rising rates.

Rising rates are causing margins to fall (in part), which is not great for the stock market. However, rates could stop climbing soon as the Fed pauses.




Growth: State Coincident % Change
The state coincident indicators seem to decline prior to recessions.

This is declining quickly pointing to levels that reflect recession. However, we still have until the fall of ’23 if the trend continues.




Housing: Permits
When new permits for housing are being issued at lower levels, this may hint at a slowdown.

Given the high house prices, low starts could be here for some time. As a result, the economy could feel it.




Household P/E ratio
High HH networth relative to income may indicate overvalued housing or other assets (like stocks).

Driven by high stock portfolios, low rates, and strong housing prices, household net worth got ahead of itself relative to housing incomes. The current correction here could take it to historically normal levels.




Housing Valuation 2
Housing prices seems to cycle around GDP per capita.

Housing prices are way too expensive on this basis. However, we think prices would move sideways with low volume (and not crash).

Business: Cass Freight Index: Expenditures
Declining shipping expenditures seems to be a decent economic warning signal.

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Business: Motor Vehicle Retail Sales: Heavy Weight Trucks
Declining heavy truck sales is often an economic warning sign.

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Business: CFNAI – Non-Financial Leverage
Strain in businesses and household leverage markets often serve as an economic warning sign.

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Business: CFNAI Activity – Diffusion Index
Declining activity may be a warning sign.

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GDP: Output Gap – positive is inflationary
When GDP exceeds potential GDP, inflation risks rise.

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Growth: GDP Nom v Real
Nomimal GDP is total economic growth before does not adjust for inflation.

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Inflation vs Inventory/Sales
When inventory levels at businesses are low, this seems to imply shortages in goods and higher levels of inflation.

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Growth: Inflation, 10-year, Nom GDP
Nominal GDP growth is somwhat tied to long-term interest rates and seems to decline prior to recessions.

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Business: Corp Profits Growth
Falling profits (especially that of ‘proprietors’) may indicate troubles ahead.

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Int Rates: Real 10-Year
Negative “real” long-term rates historically don’t last long.

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Corp Bond Yields
A negative real yield implies rates need to go up (or inflation falls) to normalize.

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Margin Debt / GDP
High levels of margin debt in the stock market often are associated with stock market peaks.

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Business: Debt/Profits
Rising levels may indicate recession risk.

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Consumer: Liabilities to Net Worth
Consumer debt levels may be part of a larger narrative regarding the health (and risks) of the consumer.

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Balance on Current Account, NIPA’s/Gross Domestic Product
A rising current account (less imports), may be a sign of a slowdown in overall spending.

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Markets: OAS v Stocks
Problems in the high-yield bonds market are associated with stock market corrections.

Investors are not overly concerned (or overly confident) with defaults.