99% Correlation with the US Stock Market and an R² of 0.97 since 1970 Our forecasting models have a fantastic 99% correlation with the US stock market on a quarterly basis since 1970 and an R² of 0.97. It means that 97 percent of the US stock market variance is predictable by the flows of data…
Business and Industrial Sentiment vs. U.S. GDP Chart suggesting that business and industrial surveys have not explained U.S. economic growth over the past decade (R² = 0). Image: Arbor Research & Trading LLC
Fed Balance Sheet vs. S&P 500 Chart suggesting that since October 2019, a 1% increase in the Fed balance sheet has been associated with a 0.9% increase in the S&P 500, (R² = 0.52). Image: Deutsche Bank Global Research
Truck Tonnage vs. S&P 500 Index The Truck Tonnage Index declined -3.5% in November. Trucks represent 70% of U.S. freight and serve as a barometer of the U.S. economy. This chart shows how the U.S. stock market has increased in line with the physical size and expansion of the US economy (R² = 0.95 since…
S&P 500 Price to Book Value vs. Future Returns The current S&P 500 price to book value suggests that equity market returns will be low over the next 10 years (R² = 0.86). Image: Tomasz Hońdo
Inequality – Intergenerational Earnings Elasticity and Gini Coefficient Chart suggesting that social mobility cannot be achieved without greater equality (R² = 0.5) Image: Financial Times
Russell 2000 vs. Russell 1000 and Subsequent 10-Year Annualized Relative Returns Chart suggesting that small caps should outperform large caps over the next 10 years (R² = 0.42). Image: BofA Merrill Lynch US Equity & US Quant Strategy
Gold Price and Central Bank Gold Sales & Purchases Chart suggesting that gold purchases from central banks have contributed to the rise in gold prices. An R² of 0.85 (since 2004) is quite high and significant. Image: BofA Merrill Lynch Global Research
S&P 500 Normalized P/E vs. Subsequent Annualized Returns Chart suggesting annual returns of around 5% over the next 10 years (R² = 0.79). Image: BofA Merrill Lynch US Equity & US Quant Strategy
U.S. Core Inflation Expected Over the Next 21 Months (Leading Indicator) This chart shows the U.S. core CPI expected over the next 21 months. It has been quite accurate for more than 20 years. The chart suggests that M2 velocity year-over-year leads U.S. core CPI by 21 months (R² = 0.61 since 1996). You may also…