GDP and Correlations

Brian Twomey Brian's Investment

GDP at last reported 3.1 skyrocketed over its 10 year average at 2.57 and now sits in ranges from 2.57 to 4.05. GDP below sits comfortably at 2.00 and its 5 year average at 1.98. Overall GDP averages from 1 to 3 year are slightly overbought but in total the averages are in great shape. This means GDP contains no problems for 2.5 and middle 2.0 's from today to infinity.

As was the same scenario under Reagan in the 1980's, tax cuts were directly responsible for GDP's fast rise but Trump added extra benefits to slash Obummer's regulatory burdens and trade wars forces US companies to operate again in the US. Trump's plan in my estimation is to bring home the powerful manufacturing base so then to export and possibly reduce reliance on traditional service exports. The last positive trade balance in the US was 1975 then the 1960's.

A Trump re election in 2020 and control of the House of Representatives means a cut to Personal Income taxes and an economy that skyrockets at 4 nd 5% GDP to infinity.

Next points below 2.57, 2.49, 2.46, 2.32 and 2.29. Currently overbought from lower averages at 2.17, 2.21 and 2.29.

Off the charts at 3.1 may explain why GDP correlates Positively to WTI and barely to the 10 year yield while negative to DXY, 2 year, Fed Funds and the S& P's. GDP is lost at 3.1 and needs a correction to then travel higher and to re correlate to its own financial instruments.

Interesting fact is AUD and NZD GDP out performed the US every quarter since March 1990 while the UK and Japan underperformed every quarter since 1990.

Correlations 120 data points

GDP Vs 10 Year Yield

Correlations 10%, Vital Averages 2.20 Vs 2.38, GDP 5 year average 1.98 Vs 10 year at 5 year average 2.27. Max range for 10 year is 50 ish points but Max spread relationship is 16 points.

GDP Vs DXY

Correlation -73%, Vital points 2.29 Vs DXY 92.44 yet 5 year average 94.72.

GDP Vs 2 year Yield

Correlation -29%, Vital points 2.20 Vs 1.437 and 5 year at 1.347.

GDP Vs WTI

Correlation 83%, solid to hold in the future. Vital Points 2.20 Vs 63.71 and 5 year average 56.69

GDP Vs Fed Funds

Correlation -22%, Vital Points 2.20 Vs 0.98 and 5 year average 0.84. The spread in this relationship is 0.57, extremely low.

GDP Vs S&P's

Correlation -45 %, Vital points 2.20 vs 2300.342 and 5 year average 23399.47. The spread in this relationship is 294 points.

Author

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

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