December 2021

The GDP-weighted trend in the global equity data (blue line) has become negative in the past three months.  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.  The current disconnect represents 16% in stock price terms (that is, stock prices are about 16% higher than they would be if the stock prices aligned with the economic trend exactly).

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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 4.2% 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 December 2021, about half of the data we track is in the “good getting better” category.  About one-fourth of the data is in the “bad getting worse” category.  US recessions have begun each time the “bad getting worse” proportion reaches 50%.  Currently, there remains a comfortable distance away from that level.

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By / Categories: Data Analysis /

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