October 2024
The GDP-weighted trend in the economic data (orange line) was relatively flat during 2023 and so far in 2024, with a slight downward shift recently, while global equity prices (black line) have risen. Typically, the trend in the economic data and stock market returns will converge over time. There is a growing disconnect at present, with the stock market outperforming the economy. This can resolve either with an improvement in the global economy or a reduction in stock prices.
The chart below shows the distribution of the global economic data tracked by Atlas Capital Advisors. Each economic index is assessed as “good” or “bad” based on how it compares with the entire past history of the index. The index is also categorized as “getting worse” or “getting better” based on how it compares to the most recent twelve months. As of September, 50% of the economic indices we track are “getting worse,” either “bad getting worse” (35% of data, in red) or “good getting worse” (15%, in blue). The proportion “good” has been steady for more than a year around 35%, vs. 65% of data in the “bad” category. US recessions have begun each time the “bad getting worse” (red) proportion reaches 50%. That level was breached in late 2022, but there was not a recession. There was a general improvement in the distribution of the data in 2023 through May 2024, with the “Bad Getting Better” cohort rising and “Bad Getting Worse” falling. Since April 2024 the “Bad Getting Worse” group has increased, indicating a shift to somewhat worse economic conditions.
