As I wait for the September update of the OECD leading indicators—producing data for July and August—I thought I’d introduce another chartbook I've been working on, this time focused on equity sectors. It replicates a variation of a Bloomberg function I used to rely on when I had access to a terminal, the Relative Rotation Graphs - RRG. Since transitioning to Macrobond as the main source of data in my day job, I no longer look at this tool as frequently as I’d like. To that end, I’ve built my own version using the SPDR S&P 500 sector ETFs, and the SPY along with the VEU, to capture the relative performance of sectors and global equities. The total return data comes from Investing.com, where I have a personal premium subscription.
Read MoreThe June 2025 edition of the global LEI chartbook can be found here. Additional details on the methodology are available here.
Global leading indicators improved further at the end of Q2, as markets and decision-makers in the real economy concluded that Mr. Trump’s tariff threats are more bark than bite. However, the U.S. President has since rekindled his appetite for tariffs, unveiling several high-profile measures targeting Asian economies, along with the weekend bombshell of a 30% tariff on imports from Mexico and Europe.
Read MoreThe March 2025 edition of the global LEI chartbook can be found here. Additional details on the methodology are available here. I’ve added a few new elements: a chart showing the G20 LEI and its three-year rolling Z-score; a comparison between headline LEI diffusion and global equities; and a chart of the first three principal components of the LEIs. Of these, the first component is the most significant—as I’ll explain below.
As the name suggests, leading indicators are designed to provide early signals on the business cycle, and by extension, on the cyclical component in financial markets and the most cyclical individual sectors. However, there are times when turning points or events disrupt the underlying conditions so abruptly that they effectively reset the clock. Trump’s tariff shock—and its implications for global goods and capital mobility—is one such event. But for the record: what did the global economy look like on the eve of this tariff shock? As it turns out, it was doing quite well.
Read MoreLast week was a good day for my boss Ian Shepherdson who has been sticking his neck out since the beginning of the year with a call that the Fed would cut rates this year by more than the consensus believes. It was a bad day for a lot of other forecasters and investors. I recently joked with him that we were just one bad payroll report away from markets freaking out. That report landed on Friday, pushing already nervy markets into near meltdown. We know the drill; bonds soared, equities crashed, and “US recession risks” hit a headline near you. Of course, the Fed hasn’t cut rates yet, but even before Friday’s data, everyone expected the first cut in September. Expectations are now shifting towards a 50bp reduction, and further cuts in quick succession after that. The decision to hold rates in July is now freely being seen as a mistake.
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