Monday, January 25, 2021

Updates Of Economic Indicators January 2021

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 January 2021 Chicago Fed National Activity Index (CFNAI) updated as of January 25, 2021:

The CFNAI, with a current reading of .52:

CFNAI

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, January 25, 2021; 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of 61:

CFNAIMA3

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, January 25, 2021; 
https://fred.stlouisfed.org/series/CFNAIMA3

The ECRI WLI (Weekly Leading Index):

As of January 22, 2021 (incorporating data through January 15, 2021) the WLI was at 150.4 and the WLI, Gr. was at 17.7%.

A chart of the WLI,Gr., from the Advisor Perspectives’ ECRI update post of January 22, 2021:

ECRI WLI,Gr. 17.7 Percent

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

The ADS Index, from 11-1-2019 through 1-16-21:

ADS Index

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

As per the December 18, 2020 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in November” the LEI was at 109.1, the CEI was at 103.2, and the LAG was 106.9 in November.

An excerpt from the release:

“The US LEI continued rising in November, but its pace of improvement has been decelerating in recent months, suggesting a significant moderation in growth as the US economy heads into 2021,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Initial claims for unemployment insurance, new orders for manufacturing, residential construction permits, and stock prices made the largest positive contributions to the LEI. However, falling average working hours in manufacturing and consumers’ worsening outlook underscore the downside risks to growth from a second wave of COVID-19 and high unemployment.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index update of December 18, 2020:

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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 3822.50 as this post is written

Friday, January 22, 2021

Money Supply Charts Through December 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 January 21, 2021 depicting data through December 2020, with a value of $21,734.0 Billion:

MZM Money Stock MZMSL

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 28.0%:

MZM Money Stock Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 22, 2021; 
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 January 21, 2021, depicting data through December 2020, with a value of $19,188.2 Billion:

M2 Money Stock M2SL

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 25.4%:

M2 Money Stock Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 22, 2021; 
https://research.stlouisfed.org/fred2/series/M2SL

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 3838.16 as this post is written

The U.S. Economic Situation – January 22, 2021 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)
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 January 20, 2021, with a last value of 31188.38):

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

DJIA 1900 - January 20, 2021

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 3841.25 as this post is written

Thursday, January 21, 2021

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 January 21, 2021 update (reflecting data through January 21, 2021) is -.7384:

STLFSI2

source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI2], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed January 21, 2021: https://fred.stlouisfed.org/series/STLFSI2

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 January 21, 2021 incorporating data from January 8, 1971 through January 15, 2021, on a weekly basis.  The January 15 value is -.61710:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 21, 2021:  
http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on January 21, 2021 incorporating data from January 8, 1971 through January 15, 2021, on a weekly basis.  The January 15, 2021 value is -.51141:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 21, 2021:  
http://research.stlouisfed.org/fred2/series/ANFCI

_________

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 3851.60 as this post is written

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” report of January 15, 2021:

from page 26:

(click on charts to enlarge images)

S&P500 EPS forecasts

from page 27:

S&P500 EPS 2011-2021

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3859.84 as this post is written

Wednesday, January 20, 2021

S&P500 EPS Estimates Calendar Years 2020, 2021 & 2022

As many are aware, Refinitiv publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings label)

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of January 15, 2021, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share; the Year 2015 value is $117.46/share; the Year 2016 value is $118.10/share; the Year 2017 value is $132.00/share; the Year 2018 value is $161.93/share; and the Year 2019 value is $162.93/share:

Year 2020 estimate:

$135.91/share

Year 2021 estimate:

$168.51/share

Year 2022 estimate:

$196.35/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3840.76 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2020 & 2021 – January 15, 2021

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings label)

For reference purposes, the most current estimates are reflected below, and are as of January 15, 2021:

Year 2020 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $120.79/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $95.22/share

Year 2021 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $165.55/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $150.06/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3836.82 as this post is written

The Stock Market Bubble – January 2021 Update

This post is a brief update to various past commentaries concerning the stock market bubble, most notably the February 2020 page titled “The Immense Stock Market Bubble And Characteristics.”

Since February 2020, the stock market bubble has grown in size, which is highly notable given the enormous size of the bubble at that time. My analyses indicate that this stock market bubble is the largest stock market bubble ever in the United States. As well, another problematic aspect is that the stock market bubble is just one of many exceedingly large asset bubbles in existence. The existence of these astoundingly large asset bubbles poses a grave risk to the financial system and economy.

I have written extensively concerning the stock market bubble, its causes, and current and future consequences. It should be noted that a fully comprehensive discussion would be exceedingly lengthy and at times very complex. Perhaps the paramount aspects of this stock market bubble is that it is far larger than most conventional measures would suggest; and that the future consequences of the “bursting” of the bubble will be highly problematical on many fronts.

As stated in the February 2020 commentary, one of the foremost signs of asset bubbles is excessive sentiment. Excessive sentiment can manifest in many ways. The current stock market environment exhibits a broad array of excessively positive sentiment. This excessively positive sentiment is often referred to as excessive speculation or “froth.” The current stock market can be categorized as an epochal speculative mania.

In the February 2020 commentary I displayed a variety of long-term charts that depicted notable fundamental and technical measures. Below is an update to one of those charts, the XLK ETF, that shows the outsized price appreciation of perhaps the most overvalued market segment, technology.

Here is the XLK (technology) ETF since the year 2000, shown on a linear price scale (top plot) and a LOG scale (bottom plot):

(click on chart to enlarge image)(charts courtesy of StockCharts.com; chart creation and annotation by the author)

Another indication of a highly elevated level of froth is the extreme excessive valuations and accompanying very rapid price advance of scores of individual stocks both in technology as well as other sectors.

As I have mentioned in previous commentaries, the “bursting” of this stock market bubble will have many adverse impacts. My analyses continue to indicate this popping of the bubble will occur during a crash.

As I have previously written, most recently in “The U.S. Economic Situation” updates:

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.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3798.91 as this post is written