Just two short months ago, Goldman Sachs was exuberant over the 'expansion' signals that the firm's Global Leading Indicator Swirlogram was exhibiting as it confirmed their 'economists' expectations that the Keynesian hockey-stick of hope would once again re-appear majestically in H2 2014 and lift America (and the world) to escape velocity. That dream is over. Confirming the collapse of world GDP expectations [5], Goldman's GLI has plunged into 'slowdown' with momentum starting to slow. Perhaps, just perhaps, as we noted previously, this time is not different and the annual cycle of extrapolating early-year hope is rapidly turning to late-year disappointment [6].
As Goldman explains...
Our September Advanced GLI came in at 3.0%yoy, down from last month’s reading of 3.1%yoy. Momentum decreased to 0.25%mom from 0.29%mom last month.
[7]
The September Advanced reading places the global cycle in the ‘Slowdown’ phase, characterised by positive but decelerating momentum.
Which explains this...
[8]
And confirms concerns that this time is no different, as we noted previously [6],
For the past five years there has been a very clear and significant cycle to US macro data - a slight rise to start the year, notable weakness into the middle of the year, a rapid recovery into the fall, then generally flat to year-end. A year ago, we explained this cycle appears to be created by government agencies need to spend, spend, spend their budgets out ahead of fiscal year-end [9] (Sept).
[10]
This year has been no different, aside from the knee-jerk higher in macro data - somewhat shocking in its magnitude to 'every' economist with 3, 4, and 5-sigma beats in many data - came a little earlier but to the same level of past year's exuberance (as perhaps Ex-Im concerns, Fed concerns, and election concerns sparked earlier-than-usual spend-down by agencies).
* * *
Of course, if this plays out... it's 'perfect' for the Fed to extend dovish language and investors to pile on into stocks on the back of the bad news... or without QE, is Fed talk no longer enough?
