Business cycle

Financial market pressure as an impediment to the usability of regulatory capital buffers

Retrieved on: 
Tuesday, October 20, 2020
Economy, Systemic risk, Finance, Money, Financial regulation, Insurance, Bank regulation, Business cycle, Macroprudential regulation, Bank, Capital requirement, Credit rating agency

Yet, banks may be unwilling to use their capital buffers, constraining the effectiveness of the measures.

Key Points: 
  • Yet, banks may be unwilling to use their capital buffers, constraining the effectiveness of the measures.
  • Indeed, banks did not fully reflect the capital relief measures in the target CET1 ratio they announce to investors.
  • So far, these policies have alleviated the need to reduce capital targets, while still being able to accommodate loan demand.

1 Introduction

    • All of these measures were aimed at avoiding a procyclical decline in bank lending to the private sector, which could further weaken macroeconomic dynamics.
    • The effectiveness of these measures critically hinges on banks willingness to adapt their internal capital planning to the temporary regulatory changes.
    • Such behaviour would indicate that the released buffers are (at least partly) usable to absorb losses without triggering deleveraging pressure.
    • Market discipline in general is essential for financial stability and helps to avoid excessive leverage in the banking sector.
    • Against this background, this article provides empirical evidence that market pressure is an impediment to the usability of regulatory capital buffers.
    • The second part explores the impact of capital ratios on banks access to funding markets.

2 Did banks lower their target capital ratios as a consequence of regulatory capital buffer releases?

    • Banks typically choose to maintain a management capital buffer on top of the regulatory capital buffers and guidance.
    • In extreme cases, banks may even need to shrink core portfolios to address the breach of capital buffers and requirements.
    • The sum of required capital (including buffers and P2G) and the target management buffer constitutes a banks capital target.
    • Many banks explicitly define their target in terms of a buffer on top of the CET1 capital threshold that triggers automatic restrictions on distributions the maximum distributable amount (MDA) trigger.
    • Chart1 Capital requirements appear to be key drivers of target CET1 ratios Banks target CET1 ratios and CET1 requirements before the COVID-19 crisis (percentages)
    • Three types of reactions were observed among the 35banks which disclosed their new internal target for the regulatory CET1 ratio between April and September 2020 (see also Chart2, left panel).
    • Chart2 Mixed reaction of euro area banks to the temporary capital relief measures and lowered macroprudential buffers Change in banks target capital ratios and distance to target after the COVID-19 outbreak (left panel: number of banks; right panel: difference between actual and target CET1 ratios, percentage points)
    • All of these banks target a level of capital, as opposed to a distance to the MDA trigger.
    • Third, a few banks maintained their regulatory capital ratio targets, despite ample capital in excess of the internal target.
    • For this set of banks, the target ratios already stood significantly above the requirements.
    • In addition, several banks entered the crisis with capital ratios below or close to their targets.
    • These banks CET1 ratios may therefore remain below target even after a reduction in capital requirements, mitigating the effectiveness of the reductions.
    • [7] This approach implicitly assumes that banks adapt their management buffer to the economic environment in order to manage the risk of unintended regulatory breaches.
    • Table1 Capital targets rise with capital requirements and adverse macrofinancial conditions Elasticity of bank target CET1 ratio to regulatory and macrofinancial determinants
    • The estimates suggest that macroprudential buffer releases should result in a significant decline in banks target ratios, but the immediate impact remains uncertain.
    • Changes in combined buffer requirements and other regulatory requirements are found to have a positive, strongly significant and economically large impact on banks CET1 ratios (see Table1), confirming that reductions of capital requirements result in declining target ratios for banks a necessary condition for an expansionary effect of macroprudential policies.
    • In adverse financial and economic conditions, banks seem to target higher regulatory capital ratios, which may counteract the impact of buffer releases.
    • The regression analysis above finds that the macro-financial environment significantly affects banks target capital ratios.

3 Does financial market pressure play a role?

    • Chart3 shows estimates of the impact of a 1percentage point decline in solvency ratios on banks funding costs based on existing empirical analyses.
    • [8] It presents the effects on banks overall funding costs (first panel) and on senior unsecured bond market funding costs in the primary and secondary markets.
    • Wholesale bond market costs exhibit a higher sensitivity than overall funding costs, which is not surprising given the importance of insured (and thus risk-insensitive) deposits in a banks overall liability structure.
    • Consequently, financial market pressure on banks will vary with, among other factors,[9] their funding structure.
    • Anecdotal evidence confirms that, all other things being equal, eroding management buffers would indicate a higher probability of default and increase the risk of rating downgrades.
    • [10] Lower ratings are not only associated with less favourable wholesale funding conditions but can also result in lost market access.
    • The market reaction immediately after the outbreak of COVID-19 is a case in point.
    • A surge in risk aversion and a flight to safety resulted in a temporary closure of the unsecured wholesale bond market.
    • Overall, the currently expected declines in regulatory capital ratios are unlikely to result in a large wave of rating downgrades associated with a major worsening of banks access to external funding markets.
    • Model simulations show that a 2percentage point decline in management capital buffers, which would be similar to aggregate CET1 capital depletion in the central scenario of the ECBs vulnerability analysis[12], would result in only a small increase in the probability of rating downgrades.
    • The largest effect would be for AAA to AA-rated banks, with an increase in the probability of being downgraded to A of between 1.5 and 2.5percentage points (see Chart5, right panel).
    • A further reason for banks reluctance to use their capital buffers could be related to the increased likelihood of MDA trigger breaches.
    • Banks facing restrictions on distributions would be unable to pay dividends, which would hit their stock market valuations, and may need to restrict coupon payments on AT1 securities and cut some components of management remuneration.
    • Rebuilding capital buffers organically would therefore be challenging and could only be achieved very gradually, over a relatively long period.
    • Such considerations may strengthen a latent unwillingness to use buffers to support the flow of bank credit in the current uncertain environment.
    • In the past such market-based risk metrics have been a strong predictor of bank distress[13] and are used by financial analysts for their investment recommendations and by rating agencies to cross-check their own rating models, ultimately affecting market funding costs.
    • Chart6 shows a notable increase in market-implied bank probabilities of default (PDs) during the COVID-19 pandemic, driven by the very low levels of the market-based leverage ratio (ratio of the market value of equity to total assets).
    • Box 1 Estimating the impact of management capital buffers on bank credit ratings Prepared by Jan Hannes Lang This box estimates the impact of a banks management capital buffer on its credit rating.
    • As shown in ChartA (left panel), higher-rated banks tend to have higher management capital buffers than lower-rated banks.
    • The estimated model coefficients reveal that lower management buffers increase the probability of a bank receiving a lower credit rating.
    • A higher banking sector credit-to-GDP ratio and a higher level of real GDP per capita both decrease the probability of a low credit rating.
    • All estimated coefficients, with the exception of the unemployment rate are statistically significant at least at the 10% level.

4 Conclusion

    • This in itself would create space for banks to expand their balance sheets, support lending and absorb future losses.
    • However, at present, banks seem unwilling to adjust fully, if at all, to the recent buffer releases.
    • Adverse and uncertain periods are characterised by low risk appetite and flight to safety among investors in bank debt and equity.
    • Lower-rated banks in particular may be concerned about their ability to access wholesale funding markets if they let their buffers shrink.
    • So far, these policies have alleviated the need to reduce capital targets, while still being able to accommodate loan demand.

References

Enhancing macroprudential space when interest rates are “low for long”

Retrieved on: 
Tuesday, October 20, 2020
Macroeconomics, Economy, Articles, Macroeconomic policy, Systemic risk, Business cycle, Great Recession, Monetary policy, Macroprudential regulation, Financial crisis of 2007–2008

Prepared by Matthieu Darracq Paris, Christoffer Kok and Matthias Rottner The availability of larger releasable buffers before the pandemic would have provided an important complement to the monetary policy mix.

Key Points: 
  • Prepared by Matthieu Darracq Paris, Christoffer Kok and Matthias Rottner The availability of larger releasable buffers before the pandemic would have provided an important complement to the monetary policy mix.
  • Had authorities built up larger countercyclical buffers (CCyB) before the pandemic, it would have been easier to release usable capital in response to the crisis.
  • This article shows that the usefulness of creating macroprudential space by enhancing countercyclical capacity (via proactive use of the CCyB) can effectively complement monetary policy actions during a crisis particularly when constrained by the effective lower bound on interest rates and thereby improve the policy mix available to achieve better macro-financial stabilisation.

1 The importance of a well-capitalised banking sector

    • The strengthening of banking sector solvency after the global financial crisis meant that euro area banks entered the coronavirus (COVID-19) crisis in a solid position.
    • The unexpected emergence of the COVID-19 pandemic and the sheer scale of the real economic impact illustrate the usefulness of a well-capitalised banking sector.
    • So far, thanks to their much improved solvency positions, euro area banks have been able to weather the current storm better than other recent crises (i.e.
    • ECBs recent vulnerability analysis showed that under the central, and most likely, scenario the banking sector is currently sufficiently capitalised to withstand a short-lived deep recession.
    • This policy complementarity, it is argued, is especially important in the current context of very low interest rates.

2 The usefulness of a more proactive countercyclical capital buffer

    • A model-based assessment illustrates the usefulness of releasable capital against the backdrop of the COVID-19 pandemic.
    • Had banks held larger releasable CCyBs could have given them more leeway to mitigate the impact of the crisis on their balance sheet.
    • The economic downturn exerts pressure on banks balance sheets and solvency position through higher losses and lower demand for financial services.
    • In response, to shield their solvency position, individual banks may have a natural inclination to deleverage their balance sheets.
    • [6] Counterfactual simulations indicate that higher CCyB accumulation before the crisis could have provided important support to bank intermediation capacity during the crisis.
    • [8] Chart1 Bank credit growth for different levels of countercyclical capacity (bank asset growth as percentage deviation from baseline projection with actual pre-crisis CCyB; end of 2022)
    • A more aggressive build-up of the CCyB before the crisis would have shielded the economy better.
    • Chart2 shows the projected path of euro area real GDP (expressed in percentage deviation from the 2019 level) reflecting the demand and supply-side shock following the lockdowns triggered by the COVID-19 pandemic.
    • The blue bars are consistent with the central forecast of the June 2020 Eurosystem staff macroeconomic projections and thus reflect the actual build-up of CCyB in the euro area banking sector of about 0.2% at the end of 2019.
    • The yellow and red bars indicate the projected path of economic activity if authorities had built up larger CCyBs before the crisis (at the end of 2019).
    • This would have freed up capital for banks to continue servicing the economy (as shown in Chart1) and would consequently have supported the resilience of the corporate sector during the recession, leading to a less severe contraction in 2020.
    • Chart2 Real GDP for different levels of countercyclical capacity (percentage deviation of real GDP level from baseline projection with actual pre-crisis CCyB)

3 Enhancing banks’ countercyclical capacity can reinforce the monetary policy transmission mechanism

    • A banking sector with more releasable capital enhances the effectiveness of the bank lending channel of monetary policy transmission.
    • Specifically, we find that if banks pre-crisis countercyclical capacity had been higher, the likelihood of monetary policy being constrained by the effective lower bound would have been reduced (see Chart3).
    • It is important to highlight that this does not imply that monetary policy accommodation is constrained in these circumstances, but simply that its transmission may be somewhat less efficient.
    • Chart3 Likelihood of hitting the zero lower bound for different levels of countercyclical capacity (percentage of quarters over the period 2020-22 where the policy rate could be constrained by the zero lower bound)
    • While a proactive CCyB setting helps to restore the monetary policy transmission mechanism in the event of large contractionary shocks, it also affects it in normal times.
    • First, banks are assumed to be capital constrained, giving rise to financial accelerator effects as in Gertler and Karadi (2011).
    • However, while banks market power is strong in good times, it weakens if the policy rate approaches a negative environment, as in Brunnermeier and Koby (2018).
    • [12] As a consequence, monetary policy affects the deposit rate less if interest rates are low.
    • Both effects reduce the net worth and weaken the balance sheets of banks, which amplifies the shock via the financial accelerator mechanism.
    • However, the impact of such a policy is non-linear, owing to the imperfect deposit rate pass-through and the lower return on government asset holdings.
    • ChartA Real GDP for different sized shocks to risk premia (x-axis: quarters; y-axis: Percentage deviations to the steady state)
    • At very low or negative interest rate levels, monetary policy becomes less effective and can even enter reversal interest rate territory in which marginal monetary policy accommodation produces contractionary effects.
    • If the risk premium shock is negative or around zero, which can be interpreted as an expansion or tranquil times respectively, monetary policy is very effective.
    • In contrast to this, as the bank lending channel of monetary policy transmission becomes less effective, policy rate reductions are less powerful in recessions than in booms, when interest rates are close to the lower bound.
    • ChartB Real GDP impact of a policy rate reduction for different sized risk premium shocks, with and without active macroprudential policy (x-axis: size of risk premium shock; y-axis: real GDP impact of monetary policy rate reduction in percentage deviation to baseline)

4 Conclusion

How has the U.S. coronavirus aid package affected household spending?

Retrieved on: 
Wednesday, October 14, 2020
Business cycle, Recession, Unemployment, Economy, Articles, CARES Act, Consumer spending, Macroeconomics, Fiscal multiplier, Economic impact of the COVID-19 pandemic in India

By Christopher D. Carroll, Edmund Crawley, Jiri Slacalek and Matthew N. White[1] The 2020 US CARES Act (Coronavirus Aid, Relief, and Economic Security) aimed to bolster consumer spending.

Key Points: 
  • By Christopher D. Carroll, Edmund Crawley, Jiri Slacalek and Matthew N. White[1] The 2020 US CARES Act (Coronavirus Aid, Relief, and Economic Security) aimed to bolster consumer spending.
  • We model the spending and saving behaviour of households during the coronavirus (COVID-19) pandemic, differentiating between the employed, temporarily unemployed and persistently unemployed, and examine how the CARES Act should affect this behaviour.
  • To do this we use a benchmark model which realistically captures the differences in income, wealth and spending between households, and which matches the responses to previous stimulus policies well.
  • For a longer-lasting lockdown (if there is a second wave of the virus), an extension of enhanced unemployment benefits is likely to be necessary for consumption spending to recover quickly.

How do we use models that capture inequality to analyse the pandemic and the US fiscal aid package?

  • As for the fiscal response, our model captures the two primary features of the CARES Act that aim to bolster consumer spending:
    1. The boost to unemployment insurance benefits, amounting to $600 per week for up to 13 weeks (i.e. a total of $7,800 if unemployment lasts for 13 weeks).
    2. The direct one-time stimulus payments to most households, of up to $1,200 per adult.
    3. Our modelling assumptions – about who will become unemployed, how long it will take them to return to employment, and the direct effect of the lockdown on consumer spending – could prove to be inaccurate. Reasonable analysts may differ on all of these points, and prefer a different calibration. To encourage exploration of different assumptions, we have made available our modelling and prediction software, with the goal of making it easy for fellow researchers to test alternative assumptions. Instructions for installing and running our code can be found here; alternatively, adjustments to our parametrisation can easily be explored with an interactive dashboard here.
    • models capturing inequality, can be used to analyse government policies in a timely manner.
    • We adapt a standard model that includes the precautionary saving motive to incorporate two aspects of the coronavirus crisis.
    • Specifically, the unemployed in our model consist of two categories: normal unemployed and deeply unemployed.
    • Similarly to in a normal recession, the normal unemployed will be able to quickly return to their old jobs (or similar ones).
    • [2] The likelihood of different households becoming unemployed reflects the fact that the hardest hit sectors disproportionately employ young and unskilled workers.

How has household spending responded to the US aid package?

    • Figure 1 shows the path of labour income, calibrated for the baseline scenario and in the pandemic, both with and without the CARES Act.
    • Income in quarters Q2 and Q3 2020 is substantially boosted (by around 10 percent) by the extra unemployment benefits and the stimulus payment.
    • So far, the existing data reflect that the assumption we made in April 2020 is approximately correct.
    • Figure 1: Effects of the pandemic and the fiscal stimulus on labour and transfer income
    • We then use our model to analyse the implications of the shocks and the fiscal stimulus for spending of individual households.
    • Figure 2 shows the three scenarios for aggregate consumption, as generated in our model.
    • Figure 2: Consumption response to the pandemic and the fiscal stimulus
    • The limited spending options during the lockdown make households save more than they otherwise would, with the result that they build up liquid assets.
    • When the lockdown ends, the pent-up savings of the always-employed are available to finance a resurgence in their spending.
    • On the other hand, the depressed spending of the two groups of unemployed people keeps total spending below the baseline until most of them are re-employed, at which point their spending (mostly) recovers while the always-employed are still spending their extra savings built up during the lockdown.

How do consumption responses vary by employment status?

    • The consumption response varies substantially depending on the employment status of households in Q2 2020.
    • For each of the three employment categories (employed, normal unemployed and deeply unemployed), Figure 3 shows the average households consumption relative to the baseline scenario with no pandemic (dashed lines).
    • Figure 3: Consumption response by employment status in Q2 2020
    • Once the lockdown ends, the spending of the always-employed households rebounds strongly thanks to their healthy household finances.
    • Our model predicts that the CARES Act will be particularly effective in stimulating their consumption, given the perception that their income shock will be largely transitory.
    • Even with the stimulus from the CARES Act, we predict that consumption spending for these households will not fully recover until the middle of 2023.
    • Even so, the Act makes a big difference to their spending, particularly in the first six quarters after the crisis.
    • [3] The longer lockdown causes a much longer decline in spending than the shorter lockdown in our primary scenario.
    • In the longer lockdown the recovery takes around three years and the CARES stimulus shortens this recovery to about two years.
    • In this more pessimistic lockdown scenario, we find that an extension of enhanced unemployment benefits is likely to be necessary for consumption spending to recover more quickly.

Conclusions

    • Our paper illustrates that models with realistic household heterogeneity are nowadays accessible to a large group of economists in academic and policy institutions.
    • These models can easily be used in real time for various policy simulations, such as the effects of the pandemic or the fiscal stimulus on the consumption of individual households.
    • We invite readers to test the robustness of our conclusions by using the associated software toolkit to choose their own preferred assumptions on the path of the pandemic, and of unemployment, to better understand how consumption will respond.

References

Economic Uncertainty Driving Gold Prices To Record Highs

Retrieved on: 
Wednesday, October 7, 2020
Business cycle, Recession, Unemployment, Economy, Time

No matter what the real reason is, they noted that uncertainty is often seen as good for gold prices.

Key Points: 
  • No matter what the real reason is, they noted that uncertainty is often seen as good for gold prices.
  • An article in NPR confirmed this scenario, saying that: "In uncertain economic times, investors tend to put their money in gold.
  • So it's perhaps little surprise that gold prices started to rise at the beginning of the year as the coronavirus started spreading in China and Europe and investors feared a global economic downturn."
  • Gold prices have soared nearly 30% so far this year and many analysts predict gold will top $2,000 by September.

Economic Uncertainty Driving Gold Prices To Record Highs

Retrieved on: 
Wednesday, October 7, 2020
Business cycle, Recession, Unemployment, Economy, Time

No matter what the real reason is, they noted that uncertainty is often seen as good for gold prices.

Key Points: 
  • No matter what the real reason is, they noted that uncertainty is often seen as good for gold prices.
  • An article in NPR confirmed this scenario, saying that: "In uncertain economic times, investors tend to put their money in gold.
  • So it's perhaps little surprise that gold prices started to rise at the beginning of the year as the coronavirus started spreading in China and Europe and investors feared a global economic downturn."
  • Gold prices have soared nearly 30% so far this year and many analysts predict gold will top $2,000 by September.

The Conference Board Leading Economic Index® (LEI) for France Increased

Retrieved on: 
Friday, September 18, 2020
Macroeconomics, Economic indicator, The Conference Board, Business cycle, Trough, Index, Economic Cycle Research Institute, Reference date

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle.

Key Points: 
  • The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle.
  • The leading and coincident economic indexes are essentially composite averages of several individual leading or coincident indicators.
  • For more information about The Conference Board global business cycle indicators, click here .
  • The Conference Board is the member-driven think tank that delivers trusted insights for what's ahead.

Why has inflation in the United States been so stable since the 1990s?

Retrieved on: 
Friday, September 18, 2020
Economy, Macroeconomics, Articles, Unemployment, Inflation, Phillips curve, Monetary policy, Business cycle, Deflation, Stagflation, NAIRU

In this article, we study the causes of the stability of US inflation over the business cycle since the 1990s.

Key Points: 
  • In this article, we study the causes of the stability of US inflation over the business cycle since the 1990s.
  • We conclude that it is mainly due to a reduced sensitivity of firms pricing decisions to their cost pressures.
  • Ignoring this observation could impair the ability of monetary policy to steer inflation toward its objective.

Inflation has become insensitive to the business cycle

    • US inflation used to rise during economic booms, as businesses charged higher prices to cope with increases in wages and other costs.
    • When the economy cooled and joblessness rose, inflation declined.
    • Since then, US inflation has remained remarkably stable, even though economic activity and unemployment have continued to fluctuate.
    • For example, shortly after the Great Recession, the unemployment rate reached 10%, but inflation barely dipped below 1%, leading many economists to look for the missing deflation (e.g.
    • More recently, with unemployment below 5% for almost four years and inflation persistently under 2%, attention turned to explaining what is holding inflation back (e.g.

Is the stability of US inflation due to changes in the functioning of labour markets, a flatter Phillips curve, or improved monetary policy?

  • What explains the emergence of this disconnect between inflation and unemployment? Economists have explored three main classes of explanations.
    1. The functioning of labour markets has changed in the last three decades, making unemployment a poorer indicator of both the degree of resource under-utilisation in the economy (sometimes referred to as “economic slack”) and of the cost pressures faced by firms.
    2. Firms’ pricing decisions have become less sensitive to these cost pressures. In economic jargon, this phenomenon corresponds to a flattening of the so-called Phillips curve – a relationship capturing the fact that a boost in production typically pushes up the cost of production inputs, and thus leads to higher output prices.
    3. Policy has become more successful in stabilising inflation (McLeay and Tenreyro, 2019).
    • In this article, we discuss the relative merit of these three explanations based on evidence from a combination of state-of-the-art macro-econometric techniques.
    • [2] The bulk of this empirical evidence points towards the second explanation a flatter Phillips curve due to the reduced sensitivity of firms pricing decisions to their cost pressures as the main driver of inflation stability.
    • In terms of policy, this finding implies that inflation has become harder to steer, unless monetary authorities systematically take into account the flattening of the Phillips curve.

Our findings

    • In contrast, inflation has become insensitive to business cycle fluctuations.
    • This observation rules out changes in the functioning of labour markets as a leading explanation for the inflation-business cycle disconnect.
    • This leaves us with two possible explanations on the table, a flatter Phillips curve and improved monetary policy.
    • Monetary policy can limit their impact on inflation by leaning against the wind, that is, by counteracting their effects on economic activity as well.
    • Therefore, if improved monetary policy is behind inflation stability, these demand shocks should have minor effects both on inflation and unemployment after 1990.
    • Figure 1 plots the responses of unemployment and inflation to a demand shock before and after 1990.
    • [3] The last two panels show that the response of inflation to demand shocks has indeed become significantly more muted since 1990.
    • If this analysis is correct, the fact that economic activity collapsed while inflation did not fall substantially suggests that the Phillips curve must be flat.
    • This flattening of the Phillips curve is also what we find by estimating the New York Fed DSGE model before and after 1990.

What’s next in terms of research in this area?

    • Investigating the deeper forces behind the flattening in the Phillips Curve is outside the scope of our analysis and it is still an open question in the specialised literature.
    • The most prominent hypothesis attributes the reduced responsiveness of prices to cost pressures to the increased relevance of global supply chains, heightened international competition, and other effects of globalisation (e.g.
    • Understanding this further is of first order importance for central banks, and it is expected to be the focus of intensive research efforts going forward.

References

Nearly 50% of Americans Felt Financially Prepared for COVID-19, Even While Saving the Same Amount of Money Each Paychecks

Retrieved on: 
Thursday, September 17, 2020
Business cycle, Recession, Unemployment

In contrast, 33% of Americans felt financially unprepared for the economic downturn that resulted from the pandemic.

Key Points: 
  • In contrast, 33% of Americans felt financially unprepared for the economic downturn that resulted from the pandemic.
  • Thirty-seven percent (37%) of Americans said they saved the same amount of money from their paychecks during the pandemic, which suggests their budgeting and spending habits weren't directly impacted.
  • Only 20% of Americans are saving more than they were pre-COVID-19.
  • In June, nearly 60% of Americans (59%) spent the bulk of their paycheck on housing, which includes rent, utilities, and mortgage payments.

The Conference Board Leading Economic Index® (LEI) for the Euro Area Decreased

Retrieved on: 
Wednesday, September 16, 2020
Macroeconomics, Economic indicator, The Conference Board, Business cycle, Trough, Index, Economic Cycle Research Institute, Reference date

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle.

Key Points: 
  • The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle.
  • The leading and coincident economic indexes are essentially composite averages of several individual leading or coincident indicators.
  • For more information about The Conference Board global business cycle indicators, click here .
  • The Conference Board is the member-driven think tank that delivers trusted insights for what's ahead.

Wells Fargo: Boom or Bust, Investors Believe Economic Fallout Is Far From Over

Retrieved on: 
Wednesday, September 16, 2020
Banking, Professional services, Finance, Articles, Philosophy, Business cycle, Recession, Unemployment, Optimism, the Wells Fargo/Gallup Investor and Retirement Optimism Index, Wells Fargo

The economy continues to weigh on investors outlook, with more saying they are pessimistic (47%) about economic growth over the next 12 months than optimistic (40%).

Key Points: 
  • The economy continues to weigh on investors outlook, with more saying they are pessimistic (47%) about economic growth over the next 12 months than optimistic (40%).
  • While we expect economic growth to resume this year, consumers continue to exercise caution on spending.
  • Most investors believe economic downturn is ahead, dismissing talks of V-shaped recovery
    In terms of an economic recovery, two-thirds of investors believe the road to recovery will be far from smooth.
  • Of the various challenges that could affect the stock market this year, investors worry most about the coronavirus (40% are very worried).