Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI2) is one index that is supposed to measure stress in the financial system.  Its reading as of the November 19, 2020 update (reflecting data through November 13, 2020) is -.8328.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on November 25, 2020 incorporating data from January 8, 1971 through November 20, 2020, on a weekly basis.  The November 20 value is -.57355:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 25, 2020:  
http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on November 25, 2020 incorporating data from January 8, 1971 through November 20, 2020, on a weekly basis.  The November 20, 2020 value is -.54235:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 25, 2020:  
http://research.stlouisfed.org/fred2/series/ANFCI

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3630.66 as this post is written

Durable Goods New Orders – Long-Term Charts Through October 2020

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through October 2020, updated on November 25, 2020. This value is $240,769 ($ Millions):

(click on charts to enlarge images)

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Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis, with a last value of -.3%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed November 25, 2020; 
http://research.stlouisfed.org/fred2/series/DGORDER

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3625.49 as this post is written

Consumer Confidence Surveys – As Of November 25, 2020

Advisor Perspectives had a post of November 25, 2020 (“Michigan Consumer Sentiment…“) that displays the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

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While I don’t believe that confidence surveys should be overemphasized, I find these readings to be notable, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3625.47 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“3rd Quarter 2020 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the third quarter), (After Tax) Corporate Profits as a Percentage of GDP is still at levels that can be seen as historically high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 25, 2020

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 3624.11 as this post is written

3rd Quarter 2020 Corporate Profits

Today’s (November 25, 2020) GDP release (Q3 2020, Second Estimate) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (preliminary estimate) for the 3rd Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated November 25, 2020, with a value of $2126.656 Billion SAAR):

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Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective (value of 10.7%):

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed November 25, 2020; https://research.stlouisfed.org/fred2/series/CP

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3625.31 as this post is written

Updates Of Economic Indicators November 2020

The following is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The November 2020 Chicago Fed National Activity Index (CFNAI) updated as of November 23, 2020:

The CFNAI, with a current reading of .83:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, November 23, 2020; 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of .75:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, November 23, 2020; 
https://fred.stlouisfed.org/series/CFNAIMA3

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The ECRI WLI (Weekly Leading Index):

As of November 20, 2020 (incorporating data through November 13, 2020) the WLI was at 143.8 and the WLI, Gr. was at 8.6%.

A chart of the WLI,Gr., from the Advisor Perspectives’ ECRI update post of November 20, 2020:

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The Aruoba-Diebold-Scotti Business Conditions (ADS) Index

The ADS Index, from 11-1-2019 through 11-14-20:

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The Conference Board Leading Economic Index (LEI), Coincident Economic Index (CEI), and Lagging Economic Index (LAG):

As per the November 19, 2020 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in October” the LEI was at 108.2, the CEI was at 102.7, and the LAG was 107.1 in October.

An excerpt from the release:

“The US LEI rose again in October, with widespread improvements despite weakness from housing permits and consumers’ outlook on economic conditions. However, the leading index has been decelerating in recent months, which suggests growth will moderate significantly in the final months of 2020, slowing down from the unusually rapid pace in Q3,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Furthermore, downside risks to growth from a second wave of COVID-19 and high unemployment persist. While The Conference Board projects the US economy will expand in Q4, the pace of growth is unlikely to exceed 2.2 percent (annual rate).”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Indicators update of November 19, 2020:

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3565.35 as this post is written

The U.S. Economic Situation – November 23, 2020 Update

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.

There are an array of indications and other “warning signs” – many readily apparent – that current economic activity and financial market performance is accompanied by exceedingly perilous dynamics.

I have written extensively about this peril, including in the following:

“Building Financial Danger” (ongoing updates)

“A Special Note On Our Economic Situation”

“Forewarning Pronounced Economic Weakness”

“Thoughts Concerning The Next Financial Crisis”

“Was A Depression Successfully Avoided?”

“Has the Financial System Strengthened Since the Financial Crisis?”

“The Next Crash And Its Significance”

My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.

For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through November 20, 2020, with a last value of 29263.48):

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 3557.54 as this post is written

Money Supply Charts Through October 2020

For reference purposes, below are two sets of charts depicting growth in the money supply.

The first shows the MZM (Money Zero Maturity), defined in FRED as the following:

M2 less small-denomination time deposits plus institutional money funds.
Money Zero Maturity is calculated by the Federal Reserve Bank of St. Louis.

Here is the “MZM Money Stock” (seasonally adjusted) chart, updated on November 19, 2020 depicting data through October 2020, with a value of $21,403.6 Billion:

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 27.7%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 20, 2020; 
https://research.stlouisfed.org/fred2/series/MZMSL

The second set shows M2, defined in FRED as the following:

M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on November 19, 2020, depicting data through October 2020, with a value of $18,812.0 Billion:

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 24.2%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 20, 2020; 
https://research.stlouisfed.org/fred2/series/M2SL

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 3581.87 as this post is written