May 3, 2016 Gallup Poll Results On Economic Confidence – Notable Excerpts

On May 3, 2016 Gallup released the poll results titled “U.S. Economic Confidence Down in April.”

Notable excerpts include:

Americans' confidence in the economy retreated in April, with Gallup's Economic Confidence Index averaging -14 for the month, down from -10 in March. The April average ties with September 2015 as numerically the worst since confidence started climbing toward positive territory in late 2014 and early 2015 after gas prices began to decline.

also:

Gallup's U.S. Economic Confidence Index is based on Americans' ratings of current conditions and their outlook on whether the economy is getting better or worse. Since March 2015, Americans have been more upbeat about the current state of the economy than about the direction in which it is headed. In late 2014 and early 2015, as gas prices dropped, the two ratings were generally similar.

In April, 24% of Americans rated current economic conditions as "excellent" or "good," while 30% said they were "poor," resulting in a current conditions score of -6. At the same time, 37% said the economy was "getting better" and 58% said it was "getting worse," for an economic outlook score of -21. The gap between the two ratings ties as the largest in the past year.

Here is an accompanying chart of the two components of the Gallup Economic Confidence Index, discussed above:

Here is an accompanying chart of the Gallup Economic Confidence Index:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2063.37 as this post is written

Recession Probability Models – May 2016

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 post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.”

Currently (last updated May 3, 2016 using data through April) this “Yield Curve” model shows a 6.28% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 6.14% probability through March, 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 May 2, 2016, currently shows a 1.78% probability using data through February.

Here is the FRED chart (last updated May 2, 2016):

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 3, 2016:

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

–

The two models featured above can be compared against measures seen in recent blog posts.  For instance, as seen in the April 7 post titled “The April 2016 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 19.03% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2063.37 as this post is written

Another Recession Probability Indicator - Updated Through Q4 2015

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of April 6, 2016, titled "Recession Probability Models - April 2016."

While I don't agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.

Another probability of recession is provided by James Hamilton, and it is titled "GDP-Based Recession Indicator Index."  A description of this index, as seen in FRED:

This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.

If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.

Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled "Recession probabilities" as well as on the "The Econbrowser Recession Indicator Index" page.

Below is a chart depicting the most recent value of 15.70%, for the fourth quarter of 2015, last updated on April 28, 2016 (the date of the Gross Domestic Product Q1 2016 Advance Estimate (pdf):

source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on April 2, 2016:

https://research.stlouisfed.org/fred2/series/JHGDPBRINDX

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2081.43 as this post is written

VIX Weekly And Monthly Charts Since The Year 2000 – May 3, 2016 Update

For reference purposes, below are two charts of the VIX from year 2000 through yesterday’s (May 2, 2016) close, which had a closing value of 14.68.

Here is the VIX Weekly chart, depicted on a LOG scale, with the 13- and 34-week moving averages, seen in the cyan and red lines, respectively:

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

–

Here is the VIX Monthly chart, depicted on a LOG scale, with the 13- and 34-month moving average, seen in the cyan and red lines, respectively:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2081.43 as this post is written

Charts Of Equities’ Performance Since March 9, 2009 And January 1, 1980 – May 3, 2016 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)

–

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)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2081.44 as this post is written

DJIA, DJTA, S&P500, And Nasdaq Composite – Long-Term Stock 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 Dow Jones Industrial Average, from 1900 – April 29, 2016:

–

The Dow Jones Transportation Average, from 1900 – April 29, 2016:

–

The S&P500, from 1925 – April 29, 2016:

–

The Nasdaq Composite, from 1978 – April 29, 2016:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2065.30 as this post is written

Euro Vs. The U.S. Dollar – May 2, 2016 Update

One of my ongoing concerns - and one that I have written of extensively - is the level and future resiliency of the U.S. Dollar.

For reference, below is a chart that I find notable.  It provides a comparison of the Euro (on the top plot) to the Dollar (depicted as the U.S. Dollar Index, found on the bottom plot) on a daily basis, with price labels, over the last five years:

(chart courtesy of StockCharts.com; chart creation by the author)

(click on charts to enlarge images)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2065.30 as this post is written

U.S. Dollar Decline – May 2, 2016 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, and the red line representing a (past) trendline:

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

(click on charts to enlarge images)

–

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):

–

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

–

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2065.30 as this post is written