In this article, Mr. Grannis analyzes and reviews his favourite economic charts and indicators,and concludes that we are in a good space, if not a cautionary one.
The panic attack that ravaged markets in the fourth quarter of last year, causing a 20% loss in the S&P 500 index, has almost completely reversed. Overseas equity markets have recovered as well; credit spreads are back to normal levels, the dollar is relatively stable, and commodity prices are up. What has changed to produce such a welcome result? For one, it has become increasingly likely that Trump will secure some sort of deal with China, thus reducing the threat of a global trade war. Second, while fears that the Fed would over-tighten turbo-charged the December panic, a more dovish Fed stance announced in early January helped sow the seeds of recovery. The bond market is now priced to no more tightening for the foreseeable future, based on an emerging consensus—apparently held by both the market and the Fed—that the U.S. economy is going to be growing at a modest pace and inflation is going to average roughly 2%.
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