Deflationary Storm CloudsMarch 19, 2014
We’ve enough items to start to make a list of the economic indicators catching our attention because they seem to be stalling out or peaking similar to what we saw in 2007.
The first group of charts touches on production, employment, consumption, employment, confidence and inflation.
The second group is a few important commodity prices, that speak to housing, growth in China and perhaps global inflation (or lack thereof).
This may explain why the shorter-term correlation between stocks and bonds has shot back up recently, indicating a growing fear of a deflationary shock.
This may also explain why counter-cyclical stocks have retaken market leadership so far this year. This tends to be consistent with bonds outperforming stocks.