Based on our users' traffic, we have gathered the top 10 key charts, which encompass important Fed indicators, global recovery, and U.S. stock market trends, to obtain insights into the economic outlook ahead. All of these charts will be continuously updated on the MacroMicro website.
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Top 10 Most Popular Charts
As we move into the second half of 2023, investors are keeping a close eye on the future trends of the overall economy. Based on our users' traffic, we have identified 10 charts that investors should pay attention to in the coming months, including the Federal Reserve's interest rate cycle, the recovery of the global economy, and the interplay between sentiment and fundamentals in the U.S. stock market. With these trends in mind, investors will be closely monitoring the charts to gain insights into the future direction of the economy.
Stock Market Too Greedy? Key Sentiment Indicators to Watch
Data on the Fed's Radar: Inflation and Employment Market
- US - Personal Consumption Expenditure Price Index
- US - Rent Consumer Price Index (CPI) vs. Zillow Rent CPI
- US - Non-farm Payroll vs. Unemployment Rate
Is the Economy Recovering? Manufacturing Holds the Key
US Stock Market Fundamentals Are Improving
Stock Market Too Greedy? Key Sentiment Indicators to Watch
Tracking US market sentiment, focus on:
After a series of tightening monetary policies, investors are paying attention to how the economy will "land". Assessing economic strengths requires a focus on two aspects: market sentiment and corporate fundamentals. Market sentiment often aligns with optimistic views during periods of prosperity and turns pessimistic during recessions. However, market expectations must also be supported by underlying fundamentals to form a comprehensive view of the economic cycle.
Assessing market sentiment positions can be effectively accomplished through indicators of buying and selling activities in the equity market. The US - CBOE Total Put/Call Ratio is widely employed to track short-term market sentiment fluctuations. This tool evaluates changes in index and equity option positions to capture the broad short-term market expectations. A lower Put/Call Ratio signifies a more optimistic market sentiment, which, in turn, suggests a higher level of greed.
The CNN Fear & Greed Index consolidates various US stock-related variables into a scale from 0 to 100, where a score above 75 represents extreme greed. This index reflects the degree to which various indicators deviate from their averages and serves as an essential indicator for assessing market sentiment.
Data on the Fed's Radar: Inflation and Employment Market
First, let's explore what's next for the Fed? Pay close attention to the following charts:
The Federal Open Market Committee (FOMC) raised interest rates by 25bp at its July meeting, as anticipated. Even though the market believes this will be the last hike, Chairman Powell stressed the importance of considering economic and inflation data to determine whether to increase rates at future meetings. The Fed's stance on future interest rate decisions essentially relies on three key data points: core inflation, housing rent, and labor market performance.
Core inflation plays a crucial role in taming inflationary pressures, and the US - PCE chart may be the most appropriate tool to gauge the Fed's interest rate stance.
Additionally, the rental component accounts for a large proportion in both CPI and PCE. Hence, the Rent CPI vs. Zillow rent CPI chart, acting as a leading indicator for inflation trends, effectively keeps pace with the Fed's rate decisions. According to the following chart, it can be seen that Rent CPI has already shown a downward trend, indicating that there is a likelihood of corresponding declines in core CPI and PCE in the near future.
Moreover, the Non-farm Payroll vs. Unemployment Rate chart is another critical indicator, the significance of which cannot be underscored enough. This chart can reveal the signs of an overheating labor market, which could trigger the infamous 'wage-price spiral.' The employment data serves as a clear reflection of the economy's current strength. Given the influence of monetary policy on the real economy, a slowdown in the labor market is often viewed as a harbinger of an imminent economic recession. Thus, any shifts in employment data are bound to influence the Federal Reserve's policy decisions.
Is the Economy Recovering? Manufacturing Holds the Key
Second, let's understand global consumption/manufacturing recovery by focusing on:
