FINANCIAL ICEBERG

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US Economy : 6 Critical Indicators of Potential Recession Flashing RED

( From FRED )

Since the beginning of the financial crisis, the Federal Reserve has been obliged to inject tons of liquidity into the system. Financial assets like the SP500 had a very good performance indeed. But at some point a little bit disconnect to the real economy.



​​We will compare the SP500 to the 6 US Economic Indicators. And more specifically :

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1) ​Value of US Manufacturers Unfilled Orders for Capital Goods ( Nondefense capital goods excluding aircraft ).

2) US Federal Government Current Expenditures

3) US Imports of Goods and Services

4) Value of Total Inventories for Durable Goods Industries

5) US Real Retail and Food Services Sales​

6) US Manufacturing Index PMI​



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Let s go through each economic data showed in charts ( in a year-over-year basis in each case )





Conclusion

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​What it is very interesting to note, is that each time the value of the 6 indicators on a year-over-year basis decline and crossed 0%, the risk of a recession has increased tremendously



The SP500 seems to ignore that fact for now even i​​n the past two recession, stocks were anticpating the slowdown... But not this time... Liquidity driven bull market... Correction ahead for the SP500 ?



​​So, when you begin to see one diverge from the other you have to start asking yourself whether the market is pricing in an overly optimistic outcome or if the economy has yet to catch up with what the market is seeing. Of course, in a market that is highly sensitive to the jawboning of central bankers, the conclusion might be more obvious than it appears.



​​New high on the SP500 recently, slowing indicators and commodities tradind down, the recipe for a Perfect Storm ?

1) ​Value of US Manufacturers Unfilled Orders for Capital Goods ( Nondefense capital goods excluding aircraft ).

2) US Federal Government Current Expenditures

3) US Imports of Goods and Services

4) Value of Total Inventories for Durable Goods Industries

5) US Real Retail and Food Services Sales​

6) US Manufacturing Index PMI​