The Swirlogram Speaks: "The World Has Reentered Contraction"

Tyler Durden's picture

The business cycle shifted into the Contraction phase of Goldman's 'Swirlogram' framework that we introduced here three weeks ago. The latest observations in their Global Leading Indicator (GLI) as well as the way we entered this Contraction phase suggest this could be a much more severe downturn. In their own words: "We do not yet see clear reasons for optimism in the data, and our GLI framework still suggests that the current phase of the cycle is in a challenging one."

Goldman's Global Leading Indicator, month-on-month, has turned negative...

and the Swirlogram has entered the Contraction phase...

but the angle at which we entered this Contraction phase is notably steep...

which has negative implications for forward 12-month S&P 500 returns...

 

As Goldman notes: "We think that the macro data are providing a clear signal. And hence, we think a negative bias remains warranted."

 

Source: Goldman Sachs