This charts on this investor dashboard are updated daily with quantified indicators to gauge the current state of the markets and the U.S. economy. Kowledge of the current conditions and trends helps anticipating the future and make better, more informed investment decisions.
Markets in October 2020
- The stock market's volatility is still high by historical standards. However, 30-day volatility levels now significantly below their 12-months counterparts, expressing less concern about the immediate future.
- Treasuries yields are rising, showing less demand for investment safe-havens and indicating less concern among investors.
- Economic indicators send ambiguous signals: The Chicago Fed's indicators seem to indicate recovery. At the same time, the Big-Four indicators show that income, employment and production are clearly in recession.
Most investment portfolios rely on stocks as the main driver for growth. Therefore, the stock market is the main concern for many investors.
The top chart shows the stock market’s total return, along with its drawdowns from previous all-time highs. This provides investors with a benchmark for recent stock market performance.
Below, the chart shows implied volatility for the next 30 days, and the next 12 months. The spread between these volatilities provides investors with a forward-looking sentiment of market volatility.
Typical investment portfolios rely on bonds as the primary source of income, and an important instrument to reduce overall portfolio volatility.
On top, the chart shows the total return for various bonds. Investors can use this as a benchmark for recent bond market performance.
The bottom chart shows yields for Federal Funds, long term Treasury Bonds, and Corporate Bonds. The spread between these yields can be used as a forward-looking sentiment of market direction.
National Activity Index
The economy and the markets are only loosely related but ultimately headed towards a common destination. Therefore economic indicators help to anticipate the future.
The Chicago Fed’s National Activity Index (“CFNAI”) combines 85 economic indicators into a single monthly measure. The CFNAI draws its indicators from 4 broad categories: Consumption, production, employment, and sales.
Historically, a CFNAI below -0.7 has been a leading indicator of a recession.
Similar to the CFNAI, this chart looks at the four main economic drivers: employment, production, sales, and income.
The top chart shows the overall trend since the end of the last recession. In a healthy economy, all four indicators are expected to rise.
The bottom chart shows the drawdown since the previous all-time high. A decline from a previous high is interpreted as a leading indicator of a recession.
Charts courtesy of TuringTrader.com