My reading of the economic and financial tea leaves would be that the economy is growing at a sub-par speed (about 2%), in the same way it offers for days gone by 8 years. I don’t see evidence of a coming boom, nor of an imminent bust. I think the marketplace needs the same thing approximately; it isn’t priced to either a boom or a bust, more of the same just.
The graph above is one of my long lasting favorites. It shows that the ISM production index does a fairly good job of monitoring the development rate of the economy. What’s especially nice would be that the index comes out with a relatively short lag of simply a fortnight, whereas we will often have to wait months to obtain a read on the overall economy. What it’s saying now is that GDP growth in today’s (third) quarter is likely to be in the number of 2-4% annualized.
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That won’t indicate that the fundamental pace of development is picking up though; it’s more likely that some faster-reported growth in today’s quarter which can make up for the relatively weak growth of recent quarters. Such is the volatile nature of GDP stats. Both charts above are stimulating, given that they show that global financial activity is probable picking up. US manufacturers are viewing strong abroad demand relatively, year or so and Eurozone manufacturers have experienced a substantial improvement within the last, after years of poor activity.
The chart above implies that US manufacturers are in least somewhat optimistic about the continuing future of their businesses, since many plan to increase hiring activity in the weeks to come apparently. The chart above implies that the ISM manufacturing index does a pretty good job of predicting corporate revenues. For weeks now, the ISM index has been informing us that profits per talk about for the S&P 500 were likely to increase, and they have indeed in increased by over 5% in the 12 months finished July.
Not amazingly, faster development of revenues went together with increased earnings. Trailing 12-month cash flow per talk about (profits on continuing operations) were up over 9% in the year ending July. No wonder the currency markets continue to edge higher. Profits and prices are both at all-time highs and grow.
The current trailing PE ratio of the S&P 500 is merely over 21, according to Bloomberg’s calculation of income from continuing functions. That’s a good deal above its long-term average of just under 17, but it’s not impossibly high. The chart above subtracts the yield on 10-yr Treasuries from the earnings yield on shares.