Charts Of Equities’ Performance Since March 9, 2009 And January 1, 1980 – January 8, 2015 Update

In the March 9, 2012 post (“Charts of Equities’ Performance Since March 9, 2009 And January 1, 1980“) I highlighted two charts for reference purposes.

Below are those two charts, updated through the latest daily closing price.

The first is a daily chart of the S&P500 (shown in green), as well as five prominent (AAPL, IBM, WFM, SBUX, CAT) individual stocks, since 2005.  There is a blue vertical line that is very close to the March 6, 2009 low.  As one can see, both the S&P500 performance, as well as many stocks including the five shown, have performed strongly since the March 6, 2009 low:

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

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This next chart shows, on a monthly LOG basis, the S&P500 since 1980.  I find this chart notable as it provides an interesting long-term perspective on the S&P500′s performance.  The 20, 50, and 200-month moving averages are shown in blue, red, and green lines, respectively:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2025.90 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the January 2, 2015 update (reflecting data through December 26) is -.989.

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 7, 2015 incorporating data from January 5,1973 to January 2, 2015, on a weekly basis.  The January 2, 2015 value is -.72:

(click on chart to enlarge image)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 7, 2015:

http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on January 7, 2015 incorporating data from January 5,1973 to January 2, 2015, on a weekly basis.  The January 2 value is .10:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 7, 2015:

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 blog 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 2016.61 as this post is written

10-Year Treasury Yield - Long-Term Chart As Of January 7, 2015

Yesterday, the yield on the 10-Year Treasury went below 1.90%, before closing at 1.963%.

As a reference, here is a long-term chart of the 10-Year Treasury yield since 1980, depicted on a monthly basis, LOG scale, with price labels:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2019.49 as this post is written

Crude Oil Price Chart From The Year 2000

One notable aspect of the financial markets is the continuing sharp drop in crude oil prices.  Other commodities have also been under selling pressure.  I view these declines, as well as other aspects of the overall financial system, to be manifestations of "deflationary pressures," of which I have extensively written.

For reference purposes, here is a chart of (spot) Light Crude Oil, from the year 2000 to yesterday's closing price, depicted on a weekly basis using a LOG scale, with price labels:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2025.59 as this post is written

Recession Probability Models – January 2015

There are a variety of economic models that are supposed to predict the probabilities of recession.

While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.

The first is the “Yield Curve as a Leading Indicator” from the New York Federal Reserve.  I wrote a blog post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.”

Currently (last updated January 5, 2015 using data through December) this “Yield Curve” model shows a 2.79% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 2.30% probability through November, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

Additional details and explanations can be seen on the “U.S. Recession Probabilities” page.

This model, last updated on January 2, 2015, currently shows a .34% probability using data through October.

Here is the FRED chart (last updated January 2, 2015):

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 5, 2015:

http://research.stlouisfed.org/fred2/series/RECPROUSM156N

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The two models featured above can be compared against measures seen in recent blog posts.  For instance, as seen in the December 12 post titled “The December 2014 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 11.45% probability of a U.S. recession within the next 12 months.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2020.58 as this post is written

Deflation Probabilities – January 5, 2015 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2018.

A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.

As for the current weekly reading, the January 2, 2015 update states the following:

The 2013–18 deflation probability—based on the 5-year TIPS issued in April 2013 and the 10-year TIPS issued in July 2008—was 0 percent on December 31, where it has been since early September 2013. The 2014–19 deflation probability is also 0 percent as of December 31.

Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2013 or the five-year period starting in early 2014.

I plan on providing updates to this measure on a regular interval.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2026.91 this post is written

Long-Term DJIA, Transports, S&P500, And Nasdaq Charts

StockCharts.com maintains long-term historical charts of various major stock market indices, interest rates, currencies, commodities, and economic indicators.

As a long-term reference, below are charts depicting various stock market indices for the dates shown.  All charts are depicted on a monthly basis using a LOG scale.

(click on charts to enlarge images)(charts courtesy of StockCharts.com)

The DJIA, from 1900-January 2, 2015:

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The Dow Jones Transportation Average, from 1900-January 2, 2015:

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The S&P500, from 1925-January 2, 2015:

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The Nasdaq Composite, from 1978-January 2, 2015:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2042.18 as this post is written

U.S. Dollar Decline – January 5, 2015 Update

U.S. Dollar weakness is a foremost concern of mine.  As such, I have extensively written about it.  I am very concerned that the actions being taken to “improve” our economic situation will dramatically weaken the Dollar.  Should the Dollar substantially decline from here, as I expect, the negative consequences will far outweigh any benefits.  The negative impact of a substantial Dollar decline can’t be overstated, in my opinion.

The following three charts illustrate various technical analysis aspects of the U.S. Dollar, as depicted by the U.S. Dollar Index.

First, a look at the monthly U.S. Dollar from 1983.  This clearly shows a long-term weakness, with the blue line showing technical support until 2007:

(charts courtesy of StockCharts.com; annotations by the author)

(click on charts to enlarge images)

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Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents a (past) trendline.  The gray dotted line is the 200-day M.A. (moving average):

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Lastly, a chart of the Dollar on a weekly LOG scale.  There are some clearly marked channels, with possible technical support depicted by the dashed light blue line:

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I will continue providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring…

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2058.20 as this post is written