A Top?

“Davidson” submits:

There is no doubt that there have been some wild trading days and massive over-valuation in some issues the past 12mos. Many seeing this activity have signaled this represents an economic cycle and stock market top. Even with fear of a market top widely believed, economic data with long histories of providing decent guidance do not support this level of pessimism. Those who only see hundreds of issues that have been overvalued fail to see the larger context and the thousands of issues that remain at significant discount to historical valuations. 4 charts describe current conditions in the larger context.

4 charts are used displaying different correlations with indicator repeats to make it easier to visualize how each of the indicators are predictive. The Chemical Activity Barometer(CAB) is used in 3 charts and for shorter and longer time spans. The CAB is the longest series with more than 100yrs of data. The SP500 is used in 2 charts to permit comparison with other economic indicators.  The US$, Recession columns, Trucking Tonnage Index(TTI), Intermodal Rail(IR), and Temporary Help Services(THS) provide insight to the correlation between other important and reliable indicators. The best insight regarding the economic trend requires all these series(and a few more).  The question one needs to answer is if most indicators are signaling the same trend taking into account that correlations are not perfect month-to-month but more prominent over 6mos.

(Click on image to enlarge)

The COVID impact should be obvious. What should also be obvious is the full recovery in CAB, IR, TTI, and a decent recovery towards pre-COVID levels for THS. Economic activity is expanding and will continue to do so as the several million unemployed return to work. The official end of the current recession has not been determined by NBER but CAB has turned higher at recession endpoints. By this measure, the US exited recession April-May 2020. Yet, many believe severe recession continues and extreme stimulus is required. The economic data does not support this thinking. Review these charts and draw your own conclusions.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests ...

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