Following our discussion of the significant drop [4] in Goldman's Global Leading Indicator (GLI), the 'Swirlogram' depiction of the business cycle (that we have described in detail here [5] and here [6]) has crashed hard into a contractionary phase. Three things stand out dramatically: 1) the velocity of entry into contraction (which empirically suggests a much harder landing) is extreme; 2) the difference between the initial and final data is dramatic indicating the false sense of hope from seasonals had given investors coming out of Q1; and 3) the current position of the Swirlogram is at nearly the same place as this time last year (with growth close to 2011 lows) - which we note was only solved by globally coordinated central bank largesse. With the market seemingly buoyed by risk sentiment currently, and with macro fundamentals still deteriorating, it appears biasing to the short-side makes sense should data weakness continue.
[7]
Source: Goldman Sachs