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Are Economic Data Set To Disappoint?
The troubles in Europe remain front and center in the minds of most rational investors causing risk aversion to rise and safe-havens to become bid. However, much has been made (mainly by those hoping to increase AUM) of the admittedly better-than-expected US macro data of the last month or so inferring US equities are the safe-haven. While we do not want to pour too much cold water on the exuberant animal spirits that a mediocre payroll print or fractionally higher PMI or an LEI that is entirely useless thanks to the underlying factors regime change, we do note that once again it is much more about beating weak expectations than it is about underlying strength. Just as with earnings beats and the hoop-la that surrounds 70% of names beating every quarter, Citi's Economic Surprise Index shows that we have swung from wildly pessimistic to perhaps too optimistic very rapidly. The Citi Surprise Index is about as high as it gets here and implies we should expect disappointing macro data relative to our expectations from here (today's CFNAI?).
The Citi Economic Surprise Index tracks relative out/under-performance of actual macro-economic prints vs expectations - i.e. -50 means we are missing expectations significantly and +50 means we are beating expectations significantly. The time series mean-reverts quite strongly and we are currently at the very high end of the series - suggesting our expectations have perhaps got a little too far ahead and disappointment is to come.
The last time we saw such a wild swing was Q1 2009 (orange box) and the deterioration in actual macro data relative to expectations was significant with the equity market only saved by accounting gimmicks and stimulus - not what we can expect this time around.
Chart: Bloomberg
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The numbers coming are going suck, housing, sales, etc....get ready for S&P 900 real soon! Benny B. will get a lump of coal under his Xmas tree as far as holiday sales go!
People actually believe government numbers?
It is like in Soviet Union. Statistics are all just fine, it is just the fact the workers failed to do their part! Beatings will continue until morale improves.
Finally, American government statisticians have filtered out all the unpleasanties from statistics! Happy years are here again! It took years of hard work but they made it!
After IMF takeover of USA (after collapse) they should fire them all and replace them with NFL and NHL statisticians. They know every single detail about players and it is all ACCURATE!
With everything happening in the world, why are expectations so high??? Really??? The level of blindness is astonishing!! I'm still amazed by how little people know about what is going on - they talk about the financial crisis like it's behind us and the Europe not having an affect in US...
We live in bizzaro world x 10!!!
The numbers are better than expected. Which means the future is likely to be worse than expected from now.
they will only disappoint those who thought a month or two of uptick meant years of upticks to come...
well thanks for the new chart porn, tyler
Citi Sur-priZe = disappointing macro data comin up?
if we can't expect accounting gimmicks and econ stimuli, we'd better have plenty of popcorn!