Chart of the Week: Cyclical GDP
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- Опубліковано 1 кві 2024
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In this video, we look at the trends in Cyclical GDP vs. Non-Cyclical GDP.
DISCLAIMER: This video does not provide investment or economic advice and is not professional advice (legal, accounting, tax). The owner of this content is not an investment advisor. Any securities, trading, or market discussion is incidental and solely for entertainment. Nothing herein shall constitute a recommendation, investment advice, or an opinion on suitability. The information in this video is provided as of its initial release date. The owner of this video expressly disclaims all representations or warranties of accuracy. The owner of this video claims all intellectual property rights, including copyrights, of and related to this video.
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I don’t know how but you’ve managed to package an unbiased analysis that is more entertaining than the sensationalized segment of economic and financial news. Thank you for your efforts to be the signal and not the noise. I understand that the economy is currently in a downturn and that we must wait for things to get better
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Thanks for the video, Eric. When things are behaving in an unprecedented manner, it's sensible to identify potential causes based on 1) how outside of historical trend they are and 2) how correlated they've been with the economy in the past. If we're in the possible world where the worst of the contraction due to the fed tightening cycle that began in 2022 is already over and behind us, then the two leading candidates for why it happened this time but never before would be 1) government spending as a % of GDP during this period looked more like war-time or recessionary stimulative spending than spending during a normal expansionary economic cycle, and 2) lingering base effects, whiplash, and consumer behavior changes due to the unprecedented 30-35% growth in M2 money supply we saw in the span of 18 months during COVID. That said, my money is still on "long and variable lags". Remember the S&P bottomed 30-31 months after the 2006 10yr3mo inversion. That's the equivalent of May 2025. I'd need to see the S&P finish Q1 2025 above 4,800 before I'd be ready to call this cycle as "the one that was different"
I wonder what qe/qt look like overlapped with these graphs especially comparing 2007/8 and today.
Excellent work! Thanks again!
Always love these videos! Keep doing great things!
This analysis is awesome.
Thank you Erick. Loved your CFA-grade news and analysis. Enjoy it a lot. Let's go cyclical!
Go 200K!
Amazing as always!
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Super interesting... time will tell!
Super analysis, thank you
Thank you for sharing your research
Thanks for this! Your content is top notch 😎. Personally I am waiting for the FED to pivot and for a few rate decreases first. I assume the s+p would take a dive after that. But the FED hasn’t pivoted yet so it is still a waiting game.
Hi Eric, I think it would be helpful to superimpose SLOOS data here. I started hearing about abnormally tight conditions in summer '23, which I think was in the wake of the First Republic/SVB situation. It would be interesting to see the lag in Fed rate hikes to lenders cutting risk and if the two are actually related at all, or if jitters in banking is what really kicked off the tightening cycle and not Fed policy.
fiscal deficit spending make the private sector debt ratio low, so less sensitive to the rate overall.
Weird indeed! Imagine if the big 7 did not out perform massively how that would contribute to the overall GDP
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Tempting to say that the effects of monetary policy are still ahead of us. Although it's possible that the brief yet severe lockdown recession reset the business cycle and has somewhat inoculated us from the typical vulnerabilities of an aging growth cycle.
Fascinating. So what’s your position? Has cyclical GDP ignored the fed’s tightening cycle or is that bill coming due with a lag?
Just one question, you kept assuming in the 2007 example that the cyclical GDP is related to the recessions and it has a long leg effect due to the rate hikes, it can also be unrelated or not directly related (there is another variable or variables and not a straight cause and effect).
I can't find the cyclical GDP on the BEA website. Where's the data from?
I think personally this economy isnt as interest rate sensitive and that is the key to understanding why it has been just so different. People have a lot of loans locked up in low interest rates, making changes upward in interest rates will do very little, hence why the change has been minor in cyclical GDP. Housing is a major portion of cyclical GDP!
The problem with that argument is that eventually people will need to refinance, and many businesses don't have fixed rate loans. Low housing inventory is creating problems that can hurt the economy, and almost all businesses are soon going to be forced to start paying higher interest rates on their loans, which will lead to economic slowdowns. The bubble isn't in residential housing like 2008, it's in commercial real estate. That's the place to look for economic troubles. We've already seen banks fail, and the Fed has plainly stated that we'll see more bank failures soon.
@@alexlowe2054 when do you think people will refinance? Isn’t there no obligation to?
Forget lag effects or interest rates insensitivity. The answer to the video is the same as of why non-cyclical GDP doesnt recede during recessions: growing govt deficit spending. At 7% deficit-to-GDP worth of fiscal juice, no wonder the 5% interest rate is not slowing the economy!
Cyclical GDP, Cyclical GDP, Cyclical GDP, Cyclical GDP, CYCLICAL GDP!!!
We sure these numbers aren't just juiced?
free college
You should really look at these GDP variances in both nominal and inflation adjusted terms.
The assessment is much different when looking at it those terms.
*Promosm* 🎶