This Week’s Message: The Economy’s Looking Up

by Marty Mazorra CFP®, ChFC® Founder & Co-Chief Investment Officer

It’s commonly said in my world that bear markets are things of recessions. And that, barring the occasional correction that dips below 20%, has been my experience. Therefore, along with the trends file that I share with you on occasion, I maintain what I call my “Macro Indicators” file, which I update every Wednesday. There’s where I track what I believe to be much of the most relevant economic data (what I don’t track in the MI file I catch in my monthly trends file) that allows me to maintain a feel for where we are in the economic cycle. With all the hoopla around the election and what may or may not be to come, this week I thought — via my macro file — I’d force our focus onto what’s presently going on under the surface.

Now that I have you all excited about the rest of this message, my challenge is how to copy and paste all of the charts, etc., without you scrolling down and shouting “MARTY, YOU’VE GOT TO BE *!#%^G KIDDING ME!” at your computer screen.

So here’s what I’m going to do: I’m going to offer you the title of each data point and highlight it green, yellow or red, denoting the signal that the chart is presently sending about the economy and, in some instances, the present state of the equity market. Some titles will make perfect sense to you in terms of meaning, others may not. Should you desire any clarity whatsoever on some or all of the following, please don’t hesitate to shoot me an email and I’ll be more than happy to provide what goes with the title:

MACRO INDICATORS
LAST CHECK: 11/16/16

CONSUMER

RETAIL
SALES
ONLINE
RETAILAUTO SALES
HOUSEHOLD
NET WORTH
CONSUMER
DEBT SERVICE RATIO
WEEKLY
MORTGAGE PURCHASE APPS
HOUSING
STARTS
HOUSING PERMITS
CONSUMER
CONFIDENCE
NAHB INDEX
(HOMEBUILDER OPTIMISM)
WEEKLY
JOBLESS CLAIMS: Sub-300k for months…
BANK CREDIT

BUSINESS

INVENTORY
TO SALES RATIO
CORPORATE
FINANCING GAP
CORPORATE
AND INDUSTRIAL LOANS
COMMERCIAL
PAPER ISSUANCE
COMMERCIAL
PAPER RATES:
SERVICES PMI
MANUFACTURING PMI
NFIB
SMALL BUSINESS OPTIMISM INDEX:
NFIB HIRING PLANS INDEX
NFIB CAPITAL EXPENDITURE PLANS INDEX
TRUCK TONNAGE
CHEMICAL ACTIVITY INDEX

FINANCIAL STRESS

2-YEAR TREASURY/FED FUNDS SPREAD
TED SPREAD
2s/10s SPREAD
10-YEAR SWAP SPREAD
SWAP RATE
3-MONTH LIBOR/FED FUNDS SPREAD
THE 12-MONTH LIBOR/FED FUNDS SPREAD
HIGH YIELD CREDIT SPREAD
CHICAGO FED FINANCIAL CONDITIONS INDEX
ST LOUIS FED FINANCIAL STRESS INDEX
KANSAS CITY FED FINANCIAL STRESS INDEX 

INFLATION

INFLATION BREAKEVENS (tip spreads) (8 year+ up from last look. Slightly lower on
the shorter end)

OTHER/GENERAL ECONOMY

ATLANTA FED GDP NOW

THE INDEX OF LEADING ECONOMIC
INDICATORS

ECONOMIC SURPRISE
INDICES

US, EZ, CHINA, JAPAN, EM

COMMODITIES

INDUSTRIAL
MATERIALS PRICES:
SCRAP STEEL
PRICE
COPPER
PRICE
THE
BALTIC DRY INDEX

FINANCIAL MARKETS

AAII SENTIMENT
NYSE SHORT
INTEREST
MARGIN DEBT 
(09/2016)
SKEW INDEX
PUT/CALL RATIO: 0.51

PUT/CALL MOVING AVERAGE (SIGNAL)

Yes, that’s a friendly color scheme. But, please, make no mistake, many of those stats are volatile and subject to abrupt change (mortgage apps, for example) — which is why I update them weekly. The accompanying charts (which I’m happy to send to you upon request) speak to the longer-term trend in each.

Per the above, as well as my recent commentaries, the setup looks decent to me going forward. Although, I can’t stress enough, the economy and the financial markets are subject to a literally uncountable array of forces, which requires that we remain forever diligent, patient and well diversified. 

Have a great weekend!
Marty




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