Growth Downturn To Continue In 2022
Specializing in economics, Macro, Portfolio Strategy, Bonds
Seeking Alpha Analyst Since 2017
Eric Basmajian is an economic cycle analyst and the Founder of EPB Macro Research, an economics-based research firm focusing on inflection points in economic growth and the impact on asset prices.
Prior to EPB Macro Research, Eric worked on the buy-side of the financial sector as an analyst at Panorama Partners, a quantitative hedge fund specializing in equity derivatives.
Eric holds a Bachelor’s degree in economics from New York University.
EPB Macro Research offers premium economic cycle research on Seeking Alpha.
Summary
- Coincident measures of real growth remain in a cyclical downtrend.
- Coincident measures of inflation remain in a cyclical upturn.
- Asset markets have started responding to the growth rate downturn.
At EPB Macro Research, we judge the rate of economic growth based on a completely objective and empirical measure of what we call "the four corners" of the economy.
Proper analysis of any economy includes a reliable measure of production, employment, income, and consumption.
Some economies are more reliant on production rather than consumption, but the production cycle is highly correlated on a global basis and generally sets the tone for cyclical ebbs and flows in the rate of overall growth.
Charted below, you can see the rate of real economic growth for the four corners of the economy using the most reliable measure of industrial production, real income, real consumption, and total employment.
We can aggregate these four reliable measures into a "coincident" index which provides a real-time measurement of the growth rate in the economy.
Charted below, you can see this coincident index of real growth and the declining trend since March 2021.
When economic growth is in a downtrend, long-term interest rates decline, and volatility in the stock market increases.
This historical relationship has held true as 30-Year Treasury bond rates have plunged from nearly 2.5% in March to roughly 1.8% today.
This decline in interest rates translates to a 23% gain for long-duration bond funds like ETF (ZROZ).
These coincident indicators do not tell us where the economy is heading, only the trending direction of current economic data.
For clues on the direction of economic growth, we need to use reliable baskets of leading economic indicators.
At EPB Macro Research, we just provided our December Cyclical Leading Indicator Update, which includes an analysis of trends in real growth, inflation, and the expected impact on asset prices.
The monthly update also comes with a PDF Chartbook available for members to download.
You can join EPB Macro Research for a no-risk free trial, read the cyclical report and download the chartbook with no commitment.
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CLICK HERE to get started, and be sure to select an annual membership to save 33% after your free trial period.
I'm looking forward to talking with you inside the members-only chatroom,
Eric Basmajian
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