I’ve been looking at some of the more interesting and unusual market charts over the past week. I started doing the same with some of my favorite economic data series: NFP, exit rates, wages, house prices, business formation, inflation, retail sales, car sales, etc.
Pick any economic chart of your choice; the simple truth is that nothing is “normal”. Normally, I’m referring to the traditional ordinary recession and recovery cycle. Everything today is anomalous and excessive, fast/powerful/deep/record breaking. . . unprecedented.
It’s not great insight – it’s pretty obvious.it starts with externality The pandemic, followed by massive fiscal stimulus to match the ongoing monetary stimulus. However, it hardly deserves a proper mention in the financial news media and economists.These are huge, huge, unusual inputs, we just become got used to give them.
I’ve been writing about these topics for decades.I’m trying to bring some new insights into any ideas I leak economy. I sometimes discuss flaws in the data assembly process, or why recency effects mean we shouldn’t get too excited about the latest news releases. Most economic data is just a continuation of previous trends and therefore not that important.
But as I go through all the market and economic charts, I am constantly reminded how abnormal this economic cycle is.
Look at the red line on the jobs chart (top): we experienced the fastest and worst jobs collapse of the post-war period, followed by the strongest recovery ever.
No matter what part of the economy you want to look back at, you’ll be hard-pressed to find a normal-looking data series:
about what retail sales?
I’ll stop there, but don’t worry, I can bore you with endless charts, all of which show what an abnormal time we’re living in.
The economy is not “new normal,” but in a “post-normal” state.
What is the purpose of reminding you of something so obvious and well understood by everyone?
Spend hours watching FinTV or reading financial media. You may wonder where the confidence of these authority figures comes from. How can they so confidently discuss not only what happened today, but so easily explain what will happen next?
Forgive my skepticism, but I have a sneaky suspicion that the experts have no idea what to expect. It has nothing to do with the market, inflation or elections or pretty much anything else that happens between today and New Year’s Eve when the ball goes down again.
I understand the game,”fake it until you make it“The bravado of it all. But that doesn’t mean I have to like it, or not remind you Most of what you hear is pure nonsense (I mean in the technical version taught by Frankfurt).
The bottom line is that consumers of financial media need to constantly remind themselves: what we actually know, and what is unknowable. If we at least do this, we have the opportunity to understand what is happening around us. Or at least, don’t screw things up to the point of damaging our own economic prospects and investment portfolios.
no one knows (May 5, 2016)
How externalities affect the system (August 14, 2020)
“Unprecedented” is the 2020 Word of the Year (December 6, 2020)
Uncertainty is not new (July 14, 2012)
Say goodbye to your assets when certainty reigns (November 9, 2010)