Position (percentile)

The share of an indicator’s own past months that its current reading is higher than. Like a percentile rank on an exam: 72 means higher than 72% of its past months; 50 is its own normal level. For prices and rates, the reading is first compared with its own 10-year average (how far above or below), and the position ranks that gap, so 100 means the furthest from the 10-year average, not necessarily a record price or rate.

Normal level

50: the middle of its own history, with half of past months higher and half lower. For prices and rates, what is compared is the gap from the 10-year average, so “normal” is how far above (or below) its 10-year average it usually is, not necessarily the average itself. Hot and cold on this site are always measured against this.

Five levels from cold to hot

0⁠–⁠20 cold, 20⁠–⁠40 cool, 40⁠–⁠60 neutral, 60⁠–⁠80 warm, 80⁠–⁠100 hot. They describe position only, not good or bad.

At a historical extreme

90 or above, or 10 or below: for most indicators an uncommon position, and the outliers this site sets out to catch; indicators with a long upward trend (such as US valuations) have often sat at the high end since the 1990s. Uncommon, but not necessarily bad.

Global anchors

17 representatives chosen from the 59 indicators of the first edition and followed in every issue; they appear on the dial on the home page.

Four forces

Money (the price and flow of money), Economy (growth, prices and their upstream drivers), Assets (the prices being pushed) and Amplifiers (sentiment, valuation and leverage).

Median

Sort a set of numbers from smallest to largest and take the one in the middle: half are larger and half smaller. A single extreme value cannot pull it away.

Overall

The median of the positions of the 17 global anchors. It looks only at how far each indicator is from its own normal, not at good or bad, so it is not a score of how well the economy is doing.

Period

Months at the same level less than a year apart are merged into one period.

What happened next

For every past month at the same level, the median change and the share of declines over the next 1, 3 and 5 years, shown next to all months for comparison. Listed only when there are at least 3 market episodes and 12 months.

Deepest drop

Starting from a given month, the furthest the price fell below that month’s level at any point in the next 5 years.

Correlation

How closely two position series move together, from −1 to +1: +1 means they rise and fall in perfect step, 0 means no visible relationship, and −1 means they always move in opposite directions.

Agreement

Correlation measured in the direction of the common explanation: when the explanation runs the opposite way (one high, the other low), the sign of the correlation is flipped. +1 means they always move together the way the explanation says; −1 means always the opposite way.

Lit

A link is lit this issue when either of its two indicators is at a historical extreme; for compounding and offsetting pairs, both indicators must be at the named end. Lit only means it is worth a look this issue, not that the link is sure to hold.

5-year periods

To test a link, the history is cut into 5-year periods, shifted one year at a time, and each period is checked for whether the two moved the way the common explanation says.

Cause, knock-on, ripple

Three common ways a link is described. Cause: a direct mechanism (for example, inflation above target leads the central bank to raise rates). Knock-on: along a supply or money chain, prices or demand upstream pass downstream (for example, oil to consumer prices, or the business cycle to company profits to share prices). Ripple: a shock spreads through money and sentiment, most visibly in crises (for example, US stocks to world stocks, or the dollar to emerging markets).

Compounding, offsetting

Two forces pushing in the same direction is compounding; two forces pulling against each other is offsetting.

Common source

Two indicators often move together because the same cause affects both, not because one directly causes the other. This site does not draw these as links.

Public substitute

Where an indicator’s license does not allow public use, this site uses public data that measure something similar and states how they differ: they measure similar things, but they are not the same number.

Year-on-year change

The change from the same month (or quarter) a year earlier.

Percentage points, basis points

The difference between two percentages is measured in percentage points: 3% and 2% differ by 1 percentage point. 1 percentage point = 100 basis points.

Yield

The average annual return from holding a bond to maturity; in other words, the interest rate the borrower pays.

Yield curve

The gap between long-term and short-term interest rates; this site uses the 10-year Treasury yield minus the 3-month Treasury bill rate. Below zero, the curve is called “inverted”.

Real interest rate

The interest rate after expected inflation; this site uses the 10-year yield on Treasury Inflation-Protected Securities (TIPS).

Credit spread

How much more companies pay to borrow than the government does; the narrower the spread, the less markets worry about companies defaulting.

Effective exchange rate

A currency’s average exchange rate against the currencies of many trading partners, weighted by trade.

Leading indicator

A composite indicator built by the OECD from orders, confidence, interest-rate spreads and other data; it usually turns a few months before GDP. 100 = the long-term norm.

Shiller CAPE

Share prices divided by average inflation-adjusted earnings over the past 10 years, compiled by Professor Robert Shiller of Yale University; used to see how high or low share prices are relative to long-term earnings.

A normal level with no hindsight

When calculating the position for any past month, the normal level uses only data up to that month, never data from later; the values themselves are today’s published versions, including later revisions.