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 September 24, 2020 update (reflecting data through September 18, 2020) is -.3850.

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 September 30, 2020 incorporating data from January 8, 1971 through September 25, 2020, on a weekly basis.  The September 25 value is -.48696:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 30, 2020:  
http://research.stlouisfed.org/fred2/series/NFCI

–

The ANFCI chart below was last updated on September 30, 2020 incorporating data from January 8, 1971 through September 25, 2020, on a weekly basis.  The September 25, 2020 value is -.93881:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 30, 2020:  
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 3357.34 as this post is written

Durable Goods New Orders – Long-Term Charts Through August 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 August 2020, updated on September 25, 2020. This value is $232,841 ($ Millions):

(click on charts to enlarge images)

–

Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis, with a last value of -4.6%:

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 September 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 3237.48 as this post is written

Zillow Q3 2020 Home Price Expectations Survey – Summary & Comments

On September 24, 2020, the Zillow Q3 2020 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An excerpt from the press release:

“In many ways, the pandemic has helped supercharge a pre-existing housing supply shortage that has struggled to keep up with strong demand,” said Zillow economist Treh Manhertz. “Many of those fortunate enough to have kept their jobs are looking to take advantage of low mortgage rates by jumping into the market, and they’re finding competition to be fierce with inventory as limited as ever. The longer-term path for prices will depend largely on the course of inventory, including whether homeowner finances are stable enough to avoid a wave of distressed sales when forbearance terms expire and at what level builders, who are reporting sky-high confidence, can bring homes to market.”

The panel is now nearly unanimous in their view that home prices will rise this calendar year, with only two of 104 respondents indicating expectations for a nationwide price fall. In the previous (Q2 2020) survey, 48 of 106 respondents expected a decline. 

“In contrast to the debate concerning the contours and sustainability of the U.S economic recovery, these survey data reveal a definitive and remarkably sharp V-shape in U.S. home price expectations,” said Terry Loebs, founder of Pulsenomics. “In a matter of a few months, the pandemic has turbo-charged what had been relatively limited acceptance of remote work, amplified the value of larger living spaces, and ushered in a new era of monetary accommodation by The Fed. With these fundamental forces stoking demand for homeownership amidst stubborn supply constraints, it’s hard to imagine home price expectations returning to the lows of last quarter any time soon.”

–

Various Q3 2020 Zillow Home Price Expectations Survey charts are available, including that seen below:

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q3 2020 Home Price Expectations Survey is interesting.  Of the 104 survey respondents, only one (of the displayed responses) forecasts a cumulative price decrease through 2024, and that forecast is seen as a 18.80% cumulative price decrease through 2024.

The Median Cumulative Home Price Appreciation for years 2020-2024 is seen as 3.5%, 6.60%, 9.51%, 12.79%, and 16.90% respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in the above-referenced forecast) will prove far too optimistic in hindsight.  From a longer-term historical perspective, such a decline is very mild in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post titled “What’s Ahead For The Housing Market – A Look At The Charts.”

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3246.59 as this post is written

Money Supply Charts Through August 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 September 17, 2020 depicting data through August 2020, with a value of $21,128.2 Billion:

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 28.4%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 23, 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 September 10, 2020, depicting data through August 2020, with a value of $18,411.8 Billion:

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 23.3%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 23, 2020; 
https://research.stlouisfed.org/fred2/series/M2SL

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3294.42 as this post is written

The U.S. Economic Situation – September 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 September 18, 2020, with a last value of 27657.42):

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3315.57 as this post is written

Total Household Net Worth As Of 2Q 2020 – Two Long-Term Charts

For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1945:Q4 through 2020:Q2).  The last value (as of the September 21, 2020 update) is $118.955335 Trillion:

(click on each chart to enlarge image)

–

Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis, with a current value of 4.4%:

Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed September 21, 2020; 
http://research.stlouisfed.org/fred2/series/TNWBSHNO

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3278.37 as this post is written

Total Household Net Worth As A Percent Of GDP 2Q 2020

The following chart is from the CalculatedRisk post of September 21, 2020 titled “Fed Flow of Funds: Household Net Worth Increased $6.2 Trillion in Q2.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:

(click on chart to enlarge image)

As seen in the above-referenced CalculatedRisk post:

The net worth of households and nonprofits rose to $119.0 trillion during the second quarter of 2020. The value of directly and indirectly held corporate equities increased $5.7 trillion and the value of real estate increased $0.5 trillion.

As I have written in previous posts concerning this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

also:

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 3281.06 as this post is written

Updates Of Economic Indicators September 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 September 2020 Chicago Fed National Activity Index (CFNAI) updated as of September 21, 2020:

The CFNAI, with a current reading of .79:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, September 21, 2020; 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of 3.05:

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, September 21, 2020; 
https://fred.stlouisfed.org/series/CFNAIMA3

–

The ECRI WLI (Weekly Leading Index):

As of September 18, 2020 (incorporating data through September 11, 2020) the WLI was at 139.4 and the WLI, Gr. was at 2.3%.

A chart of the WLI,Gr., from the Advisor Perspectives’ ECRI update post of September 18, 2020:

–

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

–

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

As per the September 18, 2020 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in August” the LEI was at 106.5, the CEI was at 100.8, and the LAG was 107.6 in August.

An excerpt from the release:

“While the US LEI increased again in August, the slowing pace of improvement suggests that this summer’s economic rebound may be losing steam heading into the final stretch of 2020,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Despite the improvement, the LEI remains in recession territory, still 4.7 percent below its February level. Weakening in new orders for capital goods, residential construction, consumers’ outlook, and financial conditions point to increasing downside risks to the economic recovery. Looking ahead to 2021, the LEI suggests that the US economy will start the new year under substantially weakened economic conditions.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index update of September 18, 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 3251.78 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – September 18, 2020 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from Advisor Perspectives’ ECRI update post of September 18, 2020 titled “ECRI Weekly Leading Index Update.”  These charts are on a weekly basis as of the September 18, 2020 release, reflecting data through September 11, 2020.

Here is the ECRI WLI (defined at ECRI’s glossary):

–

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

–

This last chart depicts, on a long-term basis, the WLI, Gr.:

_________

I post various economic 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 3343.53 as this post is written