Five Alarming Financial Charts to Consider This Halloween!

As Halloween draws near, it's not only supernatural creatures that are causing fright – financial markets are also providing a fair share of reasons to be apprehensive. From declining consumer confidence to escalating debt burdens, the economic landscape is filled with ominous indicators of instability. In this year's overview, we delve into five charts that disclose disturbing trends in global markets. While the data on the surface may seem comforting, a deeper analysis reveals that the most terrifying threats could be those hidden just out of sight… Happy Halloween!

1. Buying Cars and Houses? … An Intimidating Proposition

According to surveys from the University of Michigan, consumers perceive this as the most unfavorable time in 40 years to purchase a house or car – a concerning indication of consumer intent. Major purchases like these are vital drivers of economic growth, and with buying intent at such a low, the severity of the slowdown could be underestimated. As consumer intent fluctuates, could the labor market be narrating its own story of uncertainty?

2. Workers Scared to Resign; Businesses Hesitant to Employ

The US labor market seems robust, particularly after September's non-farm payrolls surpassed economists' forecasts and unemployment dropped to 4.1%. However, beneath the surface, both hiring and quit rates have fallen to levels usually seen in recessions. Businesses are wary of employing full-time workers, and employees are hesitant to resign due to job security worries and limited opportunities available. These signs of weakness suggest that the effects of restrictive monetary policy may be more severe than the headline labor market figures suggest. It may not be just the labor market – economic fragility is echoing throughout the economy, driven by the enduring influence of monetary policy…

3. The Echo of Restrictive Rates Throughout the Economy

Monetary policy has been restrictive for a considerable period, and since it operates with a delay, its effects are only now becoming apparent. Although central banks have started easing, policy remains more restrictive than what might be considered neutral, and this is affecting both businesses and consumers. In the US, Chapter 11 filings are steadily increasing, while credit card delinquencies over 90 days are rising to levels last seen following the Global Financial Crisis. Until monetary policy significantly eases, these trends may continue. While economic and financial pressures increase, are all risks being factored into credit markets?

4. 'Not So High'-Yield vs Investment Grade

Despite the worrying signs, credit markets are pricing in minimal risk of a significant slowdown, let alone a recession that could drastically affect credit fundamentals. In fact, the spread between investment grade and high yield bonds has narrowed to just under 2.7% — the lowest level since 2006. Could investors be underestimating the potential for economic turbulence ahead? Beyond the bond markets, another looming issue brews in the form of escalating government debt…

5. The Rising Cauldron of Global Government Debt

It's not surprising that global government debt levels have been steadily increasing, but it's important to emphasize how alarming this trend is. In the UK, for example, public sector net debt as a percentage of GDP is shockingly high. High debt can affect growth by shifting government spending away from productive investments towards debt servicing. It may also compel central banks to consider fiscal risks when raising interest rates, as aggressive hikes could destabilize public finances. With current debt levels mirroring those seen during recessions, will governments be able to respond when the next downturn occurs?

Bottom Line

These charts provide a sobering look at the current state of the global economy. From consumer intent to labor market health, from monetary policy to credit market risks, and the looming issue of global government debt, the signs are clear that we are in a precarious situation. It's crucial to consider these indicators and understand the potential implications for the economy. What are your thoughts on these trends? Do you think we are underestimating the potential for economic turbulence? Share this article with your friends and discuss your views. Don't forget to sign up for the Daily Briefing, available every day at 6pm.