Introducing “CRED”, the ClearRock Economic Dashboard™

By ClearRock Research May 29, 2018 Insights

The ClearRock Economic Dashboard™ (“CRED”) is a proprietary financial tool we have built and refined over the past 10 years.  CRED is a monthly barometer designed to measure the strength of the global economy.  We report the monthly CRED so our clients and followers can stay informed in a more meaningful data-driven fashion.

We use this tool to answer a simple question: where are we within the current business cycle? Answering this question is a core part of our investment management process and is an important factor in driving our asset allocation decisions. We believe that getting the big picture right is key for achieving long-term portfolio growth and, most important, helping our clients’ reach their financial goals.

Figure A: Several of the indicators that comprise our monthly diffusion index.

We built our Dashboard as a diffusion index since the factors that influence the economy carry varying degrees of importance. Consequently, CRED synthesizes twenty financial data points to produce a monthly diffusion index of economic health.  We represent the index using a “speedometer” with a scale of 0 to 100. A reading of 50 is neutral, which indicates that the economy is growing at its long-term historical average. A reading below 50, signals that the economy is slowing, which may lead to a contractionary phase in the economic cycle. Conversely, when CRED gives us a reading above 50, the economy is growing faster than its historical trend rate, and is likely expanding.

It is important to note that CRED is only one of the many resources that help our Investment Committee make more thoughtful decisions.  Coupled with our decades of experience, our network of external independent research sources, and our decades of investing experience, we believe we have built a sound, disciplined process to help our clients attain their financial goals.

For the month of April CRED gave us a reading of 52.5, down slightly from 62.5 in March. The reading fell toward neutral territory as fears around tariffs weighed on business optimism, despite continued strong production output data. Inclement weather weighed on employment data as payrolls were far below expectations, but this decline is likely transitory as curtailment due to inclement weather was much higher than average. The labor market continues to remain strong despite this monthly aberration. Global indicators declined as concerns over growth in Europe resurfaced.

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