Navigating shifts in global and regional financial trends

This week's chart pack covers the following topics:

• G7 inflation trends over the last six months
• Global economic recovery gains momentum as financial conditions ease
• Visualizing three years of S&P 500 sector shifts
• Bullish trends emerge in Hang Seng and CSI 300 as golden crosses appear
• Global central banks' rate expectations diverge 
• ECB Analysis of Systemic Stress in the Euro Area Financial Sectors

G7 inflation trends over the last six months

Last October, we debuted the inflation accelerometer, a dashboard designed to monitor price increase trends across the G7 nations over a six-month period. Each accelerometer – represented as a pie chart – represents inflation rates as percentages of their five-year rolling highs. 

Since its initial release, there have been no new local inflation peaks in any of the G7 countries. Encouragingly, all nations have experienced a deceleration in inflation, with all except Italy stabilizing around the 2-3% mark. Notably, France and the UK have shown significant progress in curbing inflation over the last six months. In contrast, the US has seen minimal improvement, maintaining inflation levels at around 40% of its five-year high.

Global economic recovery gains momentum as financial conditions ease

Recent updates from the OECD highlight that the global economy has been performing better than initially expected, particularly in the US. This chart analyzes various economic activity indicators alongside a Global Financial Conditions Index (FCI). We created this composite by integrating the IMF’s Developed Markets (DM) and Emerging Markets (EM) FCIs through Principal Component Analysis (PCA). This method included an Autoregressive (AR) model to predict third quarter trends, optimized by selecting the most effective lag length. 

The graph indicated positive trends, as reflected in the global Manufacturing Purchasing Managers’ Index (PMI), industrial production and trade data, all of which have shown signs of recovery recently. The global FCI corroborates these findings, approaching an easing position that favors a supportive macroeconomic environment.

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Visualizing three years of S&P 500 sector shifts

This chart presents a colorful ‘quilt’ representation of S&P 500 sector performance over the last three years, showcasing  by comparing the monthly performance of 11 S&P 500 industries, from Real Estate and Financials to Industrials and Energy. For each month, the performance of these sectors is analyzed by calculating the 20th, 40th, 60th and 80th percentiles, grouping each sector into performance brackets for comparative analysis.

Shades of blue and green represent sectors that have outperformed their peers, while various red hues indicate underperformance, as detailed in the legend. By following the horizontal progression of colors for each sector, you can track its relative performance over time, creating a visual tapestry of market dynamics. Additionally, the closing month S&P 500 price return index is plotted along the left y-axis, providing a reference for overall market trends corresponding to the sectoral shifts.

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