EAC Review #GDP #Stocks #Economy

EAC Review

Nearly all economic discussions are motivated by agendas and opinions. Opinions, driven by political, social, or perception-based outcomes, do not follow the invisible hand. The invisible hand, the collective consciousness of the world’s participants acting in their own self-interests, is the only opinion that matters.

The Economic Activity Composite (EAC), a proprietary indicator that tracks marginal economic activity inside the US. The US economy, is either expanding or contracting. A contracting EAC, for instance, increases the probability that the US and global economy will enter an economic contraction. The EAC is tracked in the trends tab of the Matrix.

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The Economy & Stocks (E&S) Report and US Dollar Index Report expand today’s review through a detail discussion of economic activity, cycles, inflation, capital flows, and more. 

The E&S Report will be a critical teaching tool for 2023. The Internet and Mainstream Media (MSM), the teaching conduits for the majority, view the macroeconomic landscape as unpredictable, volatile, and difficult to interpret (see social media post).   Landmines arise when emotion and beliefs corrupt the interpretation process.  Ignore them requires a computer, and the discipline to follow it while the majority screams fire in the hole.  As always, the individual in the mirror creates the landmines.

Social Media Post

The Economic Activity Composite (EAC), a proprietary real-time measure of economic activity, removes the voices of politicians, experts, and the individual in the mirror from interpretations. It helps us define economic expansion or contraction. The EAC’s LTCO uptick from a shallow bottom below zero suggests the following: (1) The US economy has been in a recession since April 2022, and (2) the dire economic backdrop debated on the Internet does not exist (see EAC Chart) The E&S Report 11/09/22 Report – LT, Cycles, and Delusions and other updates address the long-term economic cycles in play in 2023. These discussions will provide you with perspective while the majority dodges landmines listening to opinions.

EAC Chart

The Internet is also convinced that inflation will fall as a severe recession unfolds in 2023. Again, this belief is not supported by the invisible hand. The TIPS vs Nominal Price Spreads in the bond market reflects an ebb within an inflation backdrop. The economic backdrop won’t transition from inflation to deflation until the green box disappears (see TIPS vs Nominal Price Spread).

Inflation cannot be replaced by deflation through words, or central bank policies. Adjusting the Fed funds rate won’t alter supply, demand, or confidence. Confidence, likely the most important driver of inflation, cannot be controlled by policies. Hyperinflation is a byproduct of confidence. Failure of confidence comes only after the majority is burned by following opinions.

The choice is yours. See the economic landscape as landmines, or follow the invisible hand and be prepared.

TIP vs Nominal Price Spread

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The Matrix provides market-driven trend, cycles, and intermarket analysis.

Source: http://www.edegrootinsights.com/2022/11/eac-review-gdp-stocks-economy.html