Incoming economic data has been weaker than expected but our Macro Health Status report suggests the market is looking past current risks to brighter days - or perhaps it’s just whistling past the graveyard.
Why It Matters: On its surface, incoming data is consistent with recession. Aggregate hours worked in the economy are shrinking, real retail sales and industrial production are contracting and housing market activity remains a shambles. The Leading Economic Index from the Conference Board is signaling that a recession is on its way - and it has an unblemished record in this regard. But we are not seeing evidence of building stress across our macro indicators. The longer the incoming data disappoints and the longer the Fed feeds the economy a starvation diet of liquidity (M2 is declining at a never before seen pace), the harder it will be for the market to focus on a better tomorrow without a further reckoning of currently challenging conditions. The key from the perspective of our Macro Health report is which happens first: more green lights (indicating improvement) or more red lights (indicating deterioration).
Inside we take a Deeper Look at each of the macro indicators in our health status report, what they are currently signaling and where they might be going.
