Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the December 6, 2018 update (reflecting data through November 30, 2018) is -.889.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on December 5, 2018 incorporating data from January 8, 1971 through November 30, 2018, on a weekly basis.  The November 30 value is -.78:

NFCI_12-5-18 -.78

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed December 6, 2018:

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

The ANFCI chart below was last updated on December 5, 2018 incorporating data from January 8,1971 through November 30, 2018, on a weekly basis.  The November 30 value is -.58:

ANFCI_12-5-18 -.58

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed December 6, 2018:

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

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2653.24 as this post is written

Zillow Q4 2018 Home Price Expectations Survey – Summary & Comments

On December 4, 2018, the Zillow Q4 2018 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

Two excerpts from the press release:

The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 real estate economists and investment experts for their predictions about the U.S. housing market, including which three markets they believe are most likely to outperform the U.S., and which three are most likely to underperform in 2019.

also:

The average expected home price appreciation rate for next year is 3.8 percent, down from 4.2 percent in the previous quarter. Also, the panel’s expected annual growth rate over the next five years ticked down to 3.4 percent.

Various Q4 2018 Zillow Home Price Expectations Survey charts are available, including that seen below:

Zillow Q4 2018 Home Price Expectations chart

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q4 2018 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only four (of the displayed responses) forecasts a cumulative price decrease through 2023, and none of those forecasts is for a double-digit percentage decline.   The largest decline is seen as a 6.51% cumulative price decrease through 2023.

The Median Cumulative Home Price Appreciation for years 2018-2023 is seen as 5.80%, 10.05%, 13.15%, 16.27%, and 19.70%, and 23.20%, respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in the above-referenced forecast) will prove far too optimistic in hindsight.  From a longer-term historical perspective, such a decline is very mild in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post titled “What’s Ahead For The Housing Market – A Look At The Charts.”

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2700.06 as this post is written

VIX Weekly And Monthly Charts Since The Year 2000 – December 3, 2018 Update

For reference purposes, below are two charts of the VIX from year 2000 through Monday’s (December 3, 2018) close, which had a closing value of 16.44.

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)

VIX Weekly chart

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)

VIX Monthly chart

____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2730.27 as this post is written

Charts Of Equities’ Performance Since March 9, 2009 And January 1, 1980 – December 4, 2018 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, AMZN, 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)

S&P500 and prominent stocks

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)

S&P500 chart since 1980

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2790.37 as this post is written

Long-Term Price Charts Of Four U.S. Stock Market Indexes

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 – November 30, 2018:

DJIA since 1900

The Dow Jones Transportation Average, from 1900 – November 30, 2018:

DJTA since 1900

The S&P500, from 1925 – November 30, 2018:

S&P500 since 1925

The Nasdaq Composite, from 1978 – November 30, 2018:

Nasdaq Composite since 1978

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2760.16 as this post is written

U.S. Dollar Decline – December 3, 2018 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, in my opinion, be overstated.

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)

U.S. Dollar monthly chart

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):

U.S. Dollar 200dma chart

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:

U.S. Dollar monthly

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 2760.16 as this post is written

U.S. Economic And Financial Conditions And Future Implications

Various surveys, economic growth projections, and market risk indicators continue to indicate U.S. economic growth and stability for the foreseeable future.  The consensus view is that the U.S. economy is (very) strong and the risk of recession remains (very) low.

However, there are various indications – many of which have been discussed on this site – that this very widely-held consensus is in many ways incorrect.  There are many exceedingly problematical financial conditions that continue to exist, some of which have grown in severity.  As well, numerous economic dynamics continue to be worrisome and many economic indicators portray facets of weak growth or outright decline.

Of paramount importance is the resulting level of risk and the future economic implications.

From an “all things considered” standpoint, I continue to believe the overall level of risk is at a fantastic level, one that is far greater than that experienced at any time in the history of the United States.

Cumulatively, these highly problematical conditions will lead to future upheaval.  The resolution of these problematical conditions will determine the ongoing viability of the financial system and economy as well as the resultant quality of living.

As I have previously written in “The U.S. Economic Situation” updates:

My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2760.16 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“3rd Quarter 2018 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the third quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

Corporate Profits As A Percentage Of GDP

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 28, 2018

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2729.03 as this post is written

3rd Quarter 2018 Corporate Profits

Today’s (November 28, 2018) GDP release (Q3 2018,Second Estimate)(pdf) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (Preliminary Estimate) for the 3rd Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated November 28, 2018, with a value of $1975.665 Billion SAAR):

After-Tax Corporate Profits

Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

Corporate Profits Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed November 28, 2018; https://research.stlouisfed.org/fred2/series/CP

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2729.34 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the November 23, 2018 update (reflecting data through November 16, 2018) is -.919.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on November 28, 2018 incorporating data from January 8, 1971 through November 23, 2018, on a weekly basis.  The November 23 value is -.81:

NFCI_11-28-18 -.81

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 28, 2018:

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

The ANFCI chart below was last updated on November 28, 2018 incorporating data from January 8,1971 through November 23, 2018, on a weekly basis.  The November 23 value is -.62:

ANFCI_11-28-18 -.62

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 28, 2018:

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

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2729.64 as this post is written