Here they are: the most important charts in the world.
Once again, we asked dozens of top strategists, economists, and writers for one chart that is top of mind right now. The slideshow includes their verbatim analysis of the trend they picked.
All of these charts were submitted by June 16, so some of the data may have evolved since then.
With assistance from Rachael Levy, Elena Holodny, and Jonathan Garber.
'This is where the power and influence still reside, and nothing is going to stop the inevitability that nearly two million of this critical demographic group will be turning 70 annually for the next 15 years. And they are very likely to make it to 85 or even older with medical advancement.
This has crucial implications for the financial markets because it is when you turn 70 that you undertake the most profound asset mix shift since you were in your 30s and loaded up on equities -- when you turn 70, preservation of capital and cash flows becomes much more important, and yet in a world where 'safe yield' has become extremely scarce, the investment challenges for the ageing but not yet aged boomers are going to be daunting, to say the least.'
'This crisis has under-appreciated negative side effects for the US economy as a whole. Most significantly, student loans are making it harder for first-time home buyers to afford their own home, with more than 70% of would-be first-time buyers saying student loan debt is delaying their home purchase, according to the National Association of Realtors. As a result, the homeownership rate in the US has fallen each of the last six years despite a solid economic recovery, according to the US Census Bureau, with the biggest impact coming from the 25-34 year old cohort as seen in the chart above.
The student loan burden is not just curtailing young adults' home buying; it is weakening their consumption in general, posing a major headwind to US economic growth. In addition to the direct economic impact, the student loan crisis could also worsen the class divide. Home ownership levels at age 30 are much lower among those with college debt than those without, and when faced with today's high college costs coupled with the prospect of taking on significant debt, more students from lower-income households may choose not to attend college, worsening their outlook for employment and wage income over the course of their career. The bottomline: This crisis is likely to be a major drag on the US economy for years to come if it remains unaddressed, and an elegant fiscal-policy solution is needed, the sooner the better.'
'Since the economic expansion started in mid-2009, confidence has risen sharply while retail sales growth, after an initial recovery, has trended down. I believe this gap will close due to confidence declining to join consumer spending, which will probably continue to be muted by political turmoil, flat-to-declining real consumer incomes, higher saving by postwar babies, cautious senior citizens, limited real wealth effect on spending, deflationary expectations, the exhausted auto boom and reduced impulse buying as consumers continue to shift from in-store to online sales.'
'For some, this chart illustrates the large inconsistency between the bond and stock markets. For me, it highlights a massive and broad-based 'liquidity trade' -- one that has decoupled asset prices from fundamentals, fuelling and fuelled by high risk taking comforted by the (risky) notion that central banks will remains markets' BFF.'
'In reverse, with the unemployment rate now below NAIRU, core inflation is failing to show much acceleration. This is indicative of a very flat Phillips Curve. From the Fed's point of view, it should allow them to tolerate a continued decline in the unemployment rate without having to worry about an upside surprise in inflation.'
'If real GDP continues growing at a moderate 2% rate, labour-force participation resumes its secular downtrend during 2018 and 2019 (due to retiring baby boomers), and even if productivity growth bounces back by a full percentage point from its very subdued pace over the past five years, arithmetic says the unemployment rate will drop to the mid 3's next year and below 3% in 2019. When unemployment last fell to the mid-3s, (in the mid-1960s), inflation took off.'
'The global proliferation of the internet will not only boost global demand across many sectors but also accelerate the push toward new technological frontiers. Both dynamics are bullish for US technology leaders and emerging tech giants in China.'
'Those in the middle of the argument (the overwhelming majority) have acknowledged that inflation has softened with the caveat that (for CPI in particular) there were some important quirks in the data (wireless telephone services dragged the core CPI y/y rate down by a rather significant -0.3ppts in April!). They also weigh these rearview mirror inflation reads against the potential for an upturn in inflation as suggested by the sharp decline in the unemployment rate.
This is the classic Phillips curve argument.
Some of the more dovish members have come out and questioned the validity of the Phillips curve. (Fed Governor Lael) Brainard earlier this week is a great example. She said: 'I am not confident we can count on the Phillips curve to restore inflation to target in today's economy.' We know from the historical record that the relationship between the unemployment rate and inflation is extremely spotty at best and non-existent at worst over a long horizon. But the fact that it seems to work sometimes over short periods of time is enough for some of the true believers. We would lump the majority of Fed members into this group -- as evidenced by their recent rhetoric. Indeed, over a short-term horizon (36 months in the chart below) core CPI and the unemployment rate have seen a relatively strong negative relationship more recently (the violent swing in energy in recent years makes looking at headline CPI useless)...'
'More Treasury securities come due in 2018 than any other year, and nearly one-half of the Fed's $US2.4 trillion in Treasury holdings come due between now and 2020. In the months and years ahead, financial markets will be heavily influenced by the next chapter in the Fed's post-Great Recession journey: unwinding the balance sheet.'
'By most accounts we are late in the current business cycle, and domestic profit margins have been under pressure for the last two years. Historical patterns suggest that will continue to be the case for the foreseeable future.'
'At the sector level, the Information Technology and Energy sectors are expected to be the largest contributors to earnings and revenue growth in 2017 for companies with higher global revenue exposure. Thus, the market will likely continue to watch for any significant changes in oil prices and foreign exchange rates in the second half of 2017 that could alter these expected earnings and revenue growth rates for the full year.'
'Thus, the indicator excludes the oft-erratic contribution from inventories. The idea behind this indicator is that weakness or strength in the cyclical components of activity should precede a decline or pickup in overall activity. In the last cycle, the Duncan Leading Indicator peaked six quarters ahead of the recession, though the average lead time has been somewhat shorter in previous cycles. Still, the message today is fairly unambiguous: growth is likely to accelerate in coming quarters and recession risks remain very low.'
'As of 2016, Shiller's 10-year average inflation only adjusted EPS is $US81, too low to represent normalized S&P EPS. Bianco's 10-year average ETVA EPS is $US122. Actual 2016 S&P non-GAAP EPS is $US119. As of April 2017, Bianco PE is 19.3, suggesting a 23% premium vs. the average since 1960, while Shiller PE is 29.2 and suggests a 46% premium.'
'The recent spike in corporate defaults was largely caused by the weakened oil sector. Defaults should decline with the sustained recovery of oil prices. In addition, we expect bank loan officers to ease lending standards on the margin amid stronger economic growth, which should also improve credit performance. With fundamentals improving, investors should maintain exposure to leveraged credit.
*Model results are back-tested, with the benefit of hindsight, based on historical data. It is not an indication of the success of past model estimates or projections. Source: Haver Analytics, Moody's, Guggenheim Investments. Data as of June 8, 2017.'
'The basic point is that employment growth is still running about 'sustainable' levels. That is, labour markets are still tightening.'
'When the ratio is rising (falling), the labour market is tightening (loosening), meaning that labour market slack is being absorbed (released). When the ratio rises above 1, the actual unemployment rate has fallen below NAIRU, signifying a labour market overshooting full employment (generally associated with greater upside inflation risk).
By this measure, the economy reached full employment in February, and has since overshot, with the unemployment rate falling to 4.3% in April compared to an estimated NAIRU of 4.7%.
This is an important indicator to watch because:
• Historically, overshooting full employment reflects a mid- to-late stage expansion, roughly 2/3 complete.
• Wage growth may soon accelerate
It is the backdrop against which the Trump administration and Congress are considering stimulative tax cuts and spending increases. With the economy already at full employment, such fiscal stimulus would be more likely to elicit inflation and Fed rate hikes than faster growth. In contrast, the unemployment gap was less than 1 and falling when President Reagan cut taxes in 1981 and when President Obama enacted stimulus in 2009, and it was falling as the economy entered recession when President Bush cut taxes in 2001. In these cases, fiscal stimulus was justified on cycle stabilisation grounds.'
'Historically, changes in the share of unemployed finding jobs can be a leading indicator of recession. A coincident indicator is the share of employed being fired. That figure has dropped to new lows over the last few months. While US economic growth may not be gangbusters, the labour market is still strong despite slowing headline employment gains.'
'A common criticism of this bull market is that the low volume shows that buyers do not have a lot of conviction. The implication is, if volume does not pick up, the market may decline.
However, the past eight years show the opposite: the stock market climbs on relatively quiet trading for long stretches of time and then briefly pulls back when volume jumps.
In fact, all the gains for the stock market have come on lower-volume days since the start of 2009, as you can see in the chart below. On days when stock trading volume was below the 50-day moving average, stocks have generally gone up. Conversely, when volume was above average, stocks have been relatively flat. A quiet summer may be good news for stocks.'
'Since 1950, the average intra-year peak-to-trough drawdown on the S&P 500 has been -13.5% while the median was a loss of -10.5%. There were double-digit drawdowns in more than half of all years while one out of every six saw a 20% or worse drawdown during the year.
Although these drawdowns occur almost every year like clockwork, stocks were still up over 11% per year in this time. Stocks were positive in 79% of all years. They were up double-digits roughly 60% of the time while they finished the calendar year up 15% or more in almost 50% of the time.
In effect, double digit losses were almost as prevalent as double-digit gains even though the gains far outweighed the losses in the overall scorecard.'
'Conversely, more dispersion between winners and losers creates a better environment for stock pickers. Since mid-2016, stock correlations have fallen, plummeting to their lowest level in 10 years. We expect correlations to remain relatively low, which should provide solid opportunities for active equity managers.'
'The chart shows the number of S&P 500 issues that beat the index's return by either 25% or 50%. So for example, in 1982 the S&P was up 14.76%, 25% better was a return of 18.45% and 278 of the 500 members did better than 18.45%. While 50% better in 1982 was 22.14% and 256 members did better than 22.14%.
The chart details years when the S&P was up at least 10%. And it highlights the fact that, especially in good years there are plenty of opportunities for stock picking for active managers. Annualizing this year's results, 207 names are on pace to do 25% better than the index, while 176, 50% better.'
'At present, we are in the ninth year and thus likely in the later stages of the economic cycle. That is the usual time when the central banks begin to tighten. Importantly, this measure shifts the yield curve upward but at the same time it generally starts to flatten out. Despite the three initial rate hikes and the likelihood for the Fed set to take two more steps this year, a steepening in the yield curve therefore seems unlikely today, unless we were to see any sort of significant immediate fiscal stimulus coming out of Washington.
As history predicts, in periods of flattening yield curves growth, stocks outperform. The only exception was in the 2005-07 period when Financials outperformed. While the run up in growth stocks may feel long in the tooth looking at the relative performance, there should still be further room to run on this growth stock expansion with the yield curve unlikely to steepen dramatically when the Fed raises rates.'
'2017 is an unusual year, with none of the other G10 currencies making a strong fundamental case to outperform the EUR on the crosses, against a backdrop where the EUR economy is outperforming and political risk has for the moment dissipated.'
'The table above shows the 30-day, 60-day, 90-day and 1-year performance of the SPX following each day when the VIX closed below 10. I've colour coded the table to show that all of these sub-10 closes have occurred during just 6 periods of time, and if you really simplify it, you could say only 3 periods:
1. Dec '93 - Jan '94
2. Nov '06 -- Jan '07
3. May '17 - Jun '17
Despite what some uninformed VIX watchers may be saying, only once have such low VIX levels resulted in a market downturn within the first 30-days (-2.4% in 1994). And only in 2007 (at the beginning of the worst financial crisis in decades) was the market downturn (-6.1%) even noteworthy; and even that was well short of a true correction (a pullback exceeding 10%).
While we can never be certain that past patterns will repeat themselves, despite what some fear-mongers may be saying, there is no historical precedent to indicate that such high levels of complacency (low levels of volatility) are indicative of a market that has topped out.'
'Dow Theory says that when the performance of the Dow Jones Transports (DJT) diverges from that of the Dow Jones Industrial Average (DJIA), the broader market is vulnerable to a meaningful price decline as the shipment of goods to businesses and consumers does not confirm the optimism surrounding their production. YTD through June 5, the DJT gained 2.9% compared with the DJIA's climb of 7.2%. To some, this divergence is a bad omen.
But is it really?
When monitoring the rolling 90 trading-day correlation between the DJT and the DJIA over the past 20 years, while most market declines of 10% or more were indeed preceded or accompanied by divergences of at least two standard deviations below the mean, not all divergences of that magnitude resulted in severe declines. Therefore, while this divergence may sound alarm bells to some, it represents dissonant noise to others.
We believe that investors should not ignore its warning that a pullback (decline of 5%-9.9%) or even a correction (-10% to -19.9%) is possible. The length of time since the last correction is a simple supporter of that conclusion.
However we still believe that this bull market has further to run. Bulls don't die of old age, they die of fright. And they are most afraid of recessions, which we don't see on the horizon. Yet since corrections can occur in price or time, we are not recommending that investors attempt to time the market. Besides, the S&P 500 has taken an average of only two months to recover from pullbacks and just four months to get back to breakeven after corrections. So we continue to believe it would be better to buy than to bail.'
'You'll notice that, despite a market at or near record-highs, the Equity Risk Premium is in line with historical averages; certainly nowhere near the levels of the peak of the tech or housing bubbles. In fairness, it is low relative to recent history, but not out of line. The point is that it is not near worrisome levels that preceded significant corrections, something weighing on the minds of investors right now. I like to look at the HOLT Equity Risk Premium because it is implied by current market prices and, thus forward looking on embedded expectations of future cash flows.'
'In fact, it is the lending and borrowing that goes on to keep the euro at parity within the euro countries. When a depositor moves funds from, say, a Spanish bank to a German one, there is no exchange rate to adjust as they both use the euro.
Instead, the German central bank gets a credit against the Spanish central bank. The central banks in countries that have deposit flight, mostly accounted for by Spain and Italy, owe €1 trillion euro to other central banks, an all-time record and equal to one-quarter of their nominal GDP. German tax payers may not appreciate it, but the Bundesbank is exposed to three-fourths of that debt.'
'What is critical is the curvature of the flattening against a log axis. Always in each and every case that implied acceleration grabs full attention. I'm not a fan of traditional chart techniques for spreads: to me, they are red zone-green zone. Green-zone is ~>200 bps, red-zone is ~<50 bps and on to recession.'
'Despite recent political controversies, this trend has continued -- at least in the eyes of U.S. consumers. Hidden deep inside the University of Michigan Consumer Sentiment Survey is a series that tracks unsolicited, favourable, responses on news heard about government economic policy. It has remained at stratospheric levels since the election.
Respondents voluntarily mentioning news they heard about the government's economic policy in a favourable light has surged to an average of 23% since December from an average of just 2% between January 1978 and November 2016. Prior to this period, the highest level recorded was 9% in February and March 1981, coinciding with the start of President Ronald Reagan's administration and the announcement of his economic recovery program.'
Clinton and Al Gore 'invented' the internet, released it to the public domain, and the tech boom culminated around Y2K.
Bush II expanded housing and credit into a bubble that yielded the Global Financial Crisis.
Obama's relentless ZIRP via QE, reflated everything, and subsidies/incentives yielded massive debt loads and malinvestment. The debt is currently bigger than it was before the GFC.
During 8-year runs, lobbyists and professional politicians get favourable treatment from the Administration to benefit their constituents (donors.) Those in favour grab the reins and businesses flourish on account of regime friendliness. Then come the big political donations and the process feeds on itself and expands dramatically.
Eventually a changing of the guard occurs. Old beneficiaries lose favour and get kicked out, while new cronies get the red carpet. Clearly Trump has burned bridges and annoyed many in DC. He, at least in theory, turned DC on its head. He upended two political dynasties and crushed the DNC. Think of all of the Clinton friends who backed the wrong horse in November.
Donald has friends in different places than Obama (and the Clintons.) Start with Wilbur Ross and Rex Tillerson. Go from there. Compare that coziness to, say, the Obama Administration and Elon Musk. That's just one example of a friend of the regime with the tax subsidies and credits available. It would be foolish to dismiss the idea that a shift will occur among those who have the Donald's ear and those who had President Obama's attention.
Some businesses will flourish under Trump, others will suffer. With a modicum of certainty, we can say the past winners will not be the future winners. It usually doesn't work like that. That would be WAY too easy. The shift that occurred in November seems pretty big.
The timing, as always, is the hard part. A retrenchment looked possible on Election Day. But in the blink of an eye, we were at new highs. We have traded similarly for the first five months of this year as well.
This chart says we are overdue for the effects of a regime change. If you believe that we have another massive expansion coming on the heels of the past one, you are betting AGAINST this thesis and ignoring this chart. If you think trees grow to the sky and the Presidential Administration is irrelevant, then you can discard this chart.
How different will it be this time? Can THEY eliminate the business cycle completely?
We have our doubts and don't think it will be much different this time.
'Many important social and economic issues are embedded in the situation.'
'There are big differences between the market then and the market now: Then, loose credit, speculation, and overbuilding were ingredients in a recipe for disaster. Now, healthy home buyer demand is being driven largely by a stable economy and demographic tailwinds, which is exactly what we would expect in a healthy market. Supply has been slow to catch up to this demand, which is causing home values to grow at a faster clip than we might otherwise expect.
Beyond that, the market's fundamentals look largely healthy. Homes are largely more affordable in most markets today than they were prior to the bust, and will remain so for the foreseeable future, even if mortgage rates rise. Americans clearly continue to see the value in homeownership, especially young Americans, which bodes well for the future.'
'Across the largest metropolitan areas, the recovery has been limited to a mix of economically booming metros in the West and metros in the South that were relatively unaffected by the housing market downturn. Outside of these metros, the recovery looks very different, as the majority of zip codes with at least half of homes recovered are limited to the US heartland and the Pacific Northwest.'
'But there are solutions. For one, federal and state governments can do much more to be influential in local housing policy. That's where the crisis starts -- at the neighbourhood level -- when people vote against inclusionary zoning policies, making it difficult or impossible to build higher-density, affordable housing in a community. Federal and state governments can reward communities that change to inclusionary zoning practices by offering them infrastructure investments to improve the neighbourhoods. That way, inclusionary zoning is more appealing to longtime residents.'
The Real House-Price Affordability Story
'As house prices have sky-rocketed, discussions of housing bubbles and falling affordability have become more frequent. But, nominal house prices don't tell the real story. To get real, consider the fact that mortgage rates have remained historically low for years, allowing people to buy more in terms of monthly loan payment. Mortgage rates and income levels influence consumer house-buying power. To solve for changes in house-buying power, the First American Real House Price Index (RHPI) measures the price changes of homes adjusted for the impact of both income and interest rates on consumer house-buying power. Because the RHPI adjusts for house-buying power, it is also a measure of housing affordability.
This animation shows the real consumer house-buying power adjusted price level for 20 housing markets. The real house prices are all indexed to 100 in January 2000. As you watch the animation, you'll notice some key points in time. By the height of the housingboom in 2006, while rates had not fallen materially, exuberant market expectations drove the real house price levels higher by as much as 50 per cent and even double their 2000 levels in most markets. But, as the bubble burst and the recession hit, mortgage rates decreased, wages stagnated AND the real prices of homes declined substantially. By 2012, mortgage rates were below 4 per cent and almost all markets were less expensive than they were 12 years earlier on a real house-buying power adjusted basis.
Even today, as income levels are growing and the 30-year, fixed-rate mortgage remains close to historic lows at 4 per cent, the house prices in all but a select few markets are well below their real, house-buying power adjusted, price peak. The real house price affordability story is that low mortgage rates continue to make housing affordable. '
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'The sector is highly leveraged. Currently, financial institutions hold $US3.8 trillion of CRE loans. Smaller banks (less than $US50 billion in assets) are very exposed, holding $US1.2 trillion of CRE loans. CRE loans were one of the big factors in the financial crisis when collateral values began to collapse. The sector is very cyclical and now has turned south again.
The attached chart of Green Street's Commercial Property Price Index shows the violent cyclicality of the collateral values that now have fallen to the lowest level since May 2016. And that's just the beginning.'
'The implications of lower mortgage rates are another potential boom in refinancing that reduces payments and provides relief to household budgets, generates cash for consumer spending, and enhances home buyer affordability.'
'Starting from the cyclical trough in 2Q 2013, US household debt rose 14.1% through 1Q 2017, hitting a new historical high of $US12.725 trillion by the end of March this year. Two aspects of this growth suggest serious pressures building up on household balance sheets.
Firstly, mortgages debt remains some 7.2% below the pre-crisis peak today. Non-mortgages debt, in the mean time, is up 21.2% over the same period of time.
Secondly, although overall loans delinquencies have declined from their crisis period highs, in 1Q 2017, the rate of severe delinquencies (loans overdue 120 days and more, plus those officially classed as severely derogatory) stood at 3%, well above 2.1% for pre-crisis average.
These two facts suggest that the U.S. households are facing rising leverage risks as their non-asset backed debts pile up just as the cost of credit refinancing rises.'
'In 2016, support was discovered at the 2012 low near 1.38%. Since then, long-term trend-following tools like the 12-month moving average have turned up.
We expect 10-year Treasury yields to work their way higher within the channel given the return of intermediate-term oversold conditions. This would further the bottoming process that appears to be underway.
However, not until the upper boundary of the channel near 3.00% is surmounted can we feel confident in a lasting reversal of the multi-decade downtrend. This level is critical not only because it is potential resistance but also because it holds psychological significance.'
'At its extreme in the middle of 2016, US IG contributed 34% of yield income while representing only 11% of its market value! We find these figures fascinating in putting last year's extreme pressure to reach for yield in US credit into some quantifiable context.'
'Tasked with helping INVESTORS stay on the 'right side of history' and taking one volatile data point such as the NFP on Friday, June 2, 2017, setting a strategy based on this seems misplaced to me. Taking a look at the trend is more appropriate and so I'd offer the following chart, 'Macro (NFP, NOT-seasonally-adj, YoY percentage) vs the Academics (Term Premium) vs MICRO (UST 30y Yields -- aka REALITY)'
NFP was clearly weak and downward revisions means it was more than likely something OTHER than just a 'day count' that MISSED college grads. Visualized below is the NFP, NOT-seasonally-adjusted YoY rate of growth (percentage) along with Term Premium (FRBNY ACMP model -- back to NEGATIVE ... A big deal in my opinion) ... But again, ACMP10 is NOT something one can trade/invest. It MIGHT help inform one's decision, though. Which is why one should watch 30-year yields -- slow growth and low inflation will be locked IN IF Fed plans to TIGHTEN AND REDUCE BALANCE SHEET continue along pre-conceived course that MANY believe … Many but not ME.'
'If one of the most important stock market indexes in the world is coming out of an 18-year base, it's awfully difficult to be bearish equities as an asset class. I think this is one of the more bullish developments in the past year from any sort of secular perspective.'
'This is a snapshot showing the growing disconnect between the Market (OIS and Fed Funds) and the Fed (The 'Dots').
While the market effectively priced in a 25bp rate hike in June, investors are at growing odds with the Fed with regards to the future path of interest rate hikes. Case in point, the market is pricing in only 2.5 additional hikes by the end of 2019 vs 7.5 projected by the Fed. This differential may be due to a combination of factors including uncertainty surrounding fiscal policy reforms, the future composition of the FOMC and the impact that balance sheet reduction may have on the pace of future rate hikes.
While investors have been rewarded over the past several years for taking the 'under' on the future path of interest rates, there may be risk now that the Fed views their dual mandate as being nearly complete and continues to steadily raise rates despite the headwinds that continue to build on the horizon.'
'The SPX finished off May with a slight dip, but it was enough to secure a solid month and the sixth monthly advance in the last seven. Not surprisingly, the NDX dominated the major indices, tacking on close to 4%. But Technology didn't secure the top spot on the S&P 500 sector scoreboard. That belonged to Utilities. Granted, it wasn't by much, but with all the talk about FAANG and the domination of the biggest and most recognisable names, the XLU's breakout wasn't really a focus for most ...
So, the two most 'defensive' sectors had stellar showings last month. And they are breaking out to new highs along with Technology -- arguably the LEAST defensive area of the market.
Anyone see that one coming?
If there is a common denominator to this scenario, it seems to be interest rates. In hindsight, this is easy to see. The 10-year yield saw its five month spike from 1.31% to 2.6% top in mid-December. Technology had been lagging a bit with capital flowing to the likes of Banks and Industrials. The reflation trade was in full effect back then, and those areas, along with higher interest rates, were being touted as the projected winners for 2017, as well. That clearly didn't happen.'
'The first problem is that most federal spending is now uncontrollable. It falls in 'mandatory' categories that don't require annual votes.
• Congress knows better than to touch Social Security.
• Military and civil service retirement benefits are untouchable.
• The Treasury must pay interest on all the government's debt.
Those categories alone consume almost all of Washington's tax revenue. Add in defence spending and everything else the government does, and the result is a giant deficit. Congressional Budget Office projections show no improvement in the next decade.
But that's not all. CBO projections assume the economy will keep growing without another recession. That's highly unlikely. The last recession ended in 2009, so we are now eight years into an expansion -- feeble though it has been. The odds we will go another ten are pretty low.
The dotted line in the chart above shows federal tax revenue with a slight twist. We assume a recession starts in 2018, and that revenue falls and then recovers at the same percentage rates as it did in the 2007 recession and afterward.
That's obviously not good. Worse, there is no pain-free way to avoid it. Someone's ox is going to get gored. The only issue is whose it will be.
'Buy the parts that mine the bitcoins ... need more and more processing power to mine each additional bitcoin etc etc.'
'Even on the brink of the worst economic crisis since the Great Depression, buying stock was a smart and lucrative move for long-term investors. These two charts from Business Insider's Andy Kiersz show how investors would have made out had they invested equal amounts of money into the stock market on a monthly basis right after it peaked in 2007 and tumbled for 15 months. It shows that even if you were buying as the market crashed, you would have cleaned up if you had the stomach to not sell.'
'While the supply of money has expanded a lot in the last few years, the velocity of money has fallen off a cliff. The price level depends on both of these factors. So the decline in velocity has given the Fed some cover to go slow on interest rate hikes despite the desire to return to a more normal monetary regime.'
'First, US political risk has led to the pricing and repricing of market risk premiums around the current US administration's economic reform agenda. Stalled congressional agendas and turmoil around personnel changes in particular serve as examples where in our view, the market re-priced expectations for the timing and/or probability of significant economic reform, giving a bid to gold.
Second, outside of the US, geopolitical events like missile strikes and tests, geopolitical spats, and political risks such as European elections, all point to the potential for unexpected risks in the market. All are inherently difficult to forecast, and thus help make the point that the gold market should 'expect the unexpected.''