January 2024

The GDP-weighted trend in the economic data (orange line) was relatively flat during 2023, with a slight upward shift recently, while global equity prices (black line) rose. Typically, the trend in the economic data and stock market returns will converge over time. There is somewhat of a 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. For example, the US unemployment rate at 3.7% is “good” because it compares favorably with the long-term median of 5.7% and “getting worse” because it is higher than the prior twelve-month average. As of January, 48% of the economic indices we track are “getting worse,” either “bad getting worse” (34% of data, in red) or “good getting worse” (12%, in blue). The proportion “good” has been steady all 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 that has not yet led to a recession. There has been an improvement in the distribution of the data in 2023 through January 2024, with the “Bad Getting Better” cohort rising and “Bad Getting Worse” falling.

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