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Economic Breadth Is Significantly Deteriorating in the US

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    November 3, 2016

    Philly Fed state coincident data came out today and more states across the country are starting to contract (shown in red). Looking at the snapshot below, positively growing states still dominate the map (and don’t give much of an alarming picture), but a different story emerges when we look at the trend.

    State coincident index September 2016

    Here’s a look at how this data has trended over the past 36 years compared to the S&P 500. As you can see, states showing positive growth tend to rollover prior to economic recessions (red bars) with corresponding declines in the S&P 500.

    Interview Chris Puplava on Business Cycle Investing, Preparing for the Next Recession

    The latest data puts us near the weakest levels during this entire economic cycle and matches prior market tops.

    Philadelphia fed coincident index one month

    There was a strong increase in the number of states with negative monthly changes this year. As shown below, this data typically leads US initial unemployment claims and suggests we could see a pickup in jobless claims (layoffs) in the near future.

    unemployment claims near future

    M&A deal activity (shown inverted below) tends to exhibit a euphoric peak and mark the end of an economic/bull market cycle. In terms of transaction values, M&A activity peaked earlier this year and also argues for a pickup in layoffs ahead.

    unemployment m.a. transactions

    Now listen to David Rosenberg on Economic Outlook, Escalating Political Risks

    Also ECRI’s Lakshman Achuthan: US Economy Reaching a Turning Point

    Images: via Flickr (licence attribution)

    About The Author – Chris Puplava, Financial Sense Online

    Chris graduated magna cum laude with a B.S. in Biochemistry from California Polytechnic State University, San Luis Obispo. He joined PFS Group in 2005 and is currently pursuing the designation of Chartered Financial Analyst. His professional designations include FINRA Series 7 and Series 66 Uniform Combined State Law Exam. He manages PFS Group’s Precious Metals Managed Account, Energy Managed Account, and Aggressive Growth Managed Account. Chris also contributes articles and Market Observations to Financial Sense and co-authors In the Know—a weekly communication for Jim Puplava’s clients only—with other members of the trading staff. Chris enjoys the outdoors.


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