Trouble Coming to Paradise
Gordon T. Long
The Macro Indicators are signaling there is potential trouble coming to paradise.
Goldman Sachs points out in a recent study that there is a remarkably strong correlation which has emerged as a result of global central bank policy initiatives. The steely eyed Tyler Durden at Zero Hedge points out:
We have noted the odd cyclicality in macro data (and its leading effect on the market) and it seems Goldman Sachs has also noticed that something is different this time. For 15 years, the seasonal patterns in Goldman’s macro index have been mild to totally negligible; but since 2009, something changed.
As the chart below indicates, it really is different this time as the macro cycle has become extremely short and consistent (drop in H1, rise in H2) – and is evident not just top-down but bottom-up in payrolls and ISM for instance. Goldman expounds pages of statistical jiggery-pokery to show what we suspected – that this is not weather or seasonality effects, and is not just US (UK and Europe see same pattern of six month cycles); but appears driven by central-bank policy actions (which have been more concentrated in Q4/Q1). 2013 is playing out exactly as the last three years has – with a downdraft that is set to continue for the next few months – though they note that stability in oil prices this time (and recent expansion of easing efforts – Fed and BoJ) may shift the pattern. For now, it appears the macro cycle is becoming shorter and warrants concern as they are unable to find anything but ‘reality’ as a driver of this odd cyclical pattern as the real economy fades rapidly after each and every infusion of promises from the Central Banks.