The GDP-weighted trend in the global equity data (blue line) has been somewhat negative since late 2021. Global equity prices (green line) have begun to turn down to align with the trend in economic data. Typically, the trend in the economic data and stock market returns will converge over time. With the Russian invasion of Ukraine boosting inflation while impairing consumer sentiment, we expect the economic data trend to continue to worsen, which would imply further downward pressure on stock prices.
The chart below shows the distribution of the global economic data tracked by Atlas Capital. Each economic index is assessed as “good” or “bad” based on how it compares with the entire past history of the index. The index is also categorized as “getting worse” or “getting better” based on how it compares to the most recent twelve months. For example, the US unemployment rate at 3.8% is “good” because it compares favorably with the long-term median of 5.7% and because the unemployment rate fell in the past year it is “getting better”, so it is included in the “GGB”, or “good getting better” quadrant. As of March 2022, most of the economic indices we track are “getting worse,” either “bad getting worse” (32% of data, in red) or “good getting worse” (26%, in blue). US recessions have begun each time the “bad getting worse” (red) proportion reaches 50%. Currently, there remains a comfortable, but shrinking, distance from that level, so we would not expect an imminent recession.