Tuesday, March 10, 2020

Macro Update: Really Not Good!

This macro update is coming to you a bit late; catching up from a few days away from the office:

While -- for the past 20 weeks straight -- I've been able to for the most part characterize our weekly macro analysis as marginally negative, well, alas, that's no longer the case.

The latest weekly scoring of our proprietary macro index came in at a solidly negative -21.43, with 23% of its data points scoring positive, 45% negative and 32% neutral.

Click each insert below to enlarge...

PWA Macro Index:

Four indicators deteriorated enough to reduce their score, while none improved.

Those four being:  

ISM Manufacturing Survey (straddling the expansion/contraction line):

Global Purchasing Managers Index (hugely in recession mode):

Inflation Breakevens (spread between Treasury Inflation Protected bonds and regular treasuries) rolling over:

Staples/Discretionary stocks ratio (rising trend means staples outperforming):

Now, if the above wasn't concerning enough, our all-important Financial Stress Index just moved firmly into the red as well; -33.33. 

Here are the indicators that suggest the economy and the credit markets are unusually, and dangerously, stressed (red shaded areas highlight past recessions):

2-yr Treasury/Fed Funds Spread:

TED Spread (3-mo LIBOR/3-mo T-Bill spread):

High Yield Credit Spread (junk bond/treasury bond yield spread):

Merrill Lynch Global Financial Stress Index:

CDS (credit default swap [price of bond default insurance]) Spreads (spiking in most categories; chart below is for US investment grade corporates):

The above suggests that the credit bubble we've been discussing herein for months is starting to leak. Again, that's concerning!

Stay tuned...

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