Charting Last Week (9/30 - 10/4/13) - The Shutdown Edition

The Daily Leading Index rose by 0.06% percentage points to 6.11%. The Daily Coincident Index is at 2.69%. The Daily Leading Index page on the tab above is updated daily during the week.

With the U.S. Government shutdown, the big question is how this will affect the markets. With the Budget Crisis of 2011, the Daily Leading Index dropped to 1.01% and the S&P500 (SPY) dropped by 17.9%. With the Budget Sequestration of 2013, the Daily Leading Index dropped to 1.48% in December 2012 and the S&P500 dropped by 7.3%. The U.S. Government shutdown hasn't impacted the Daily Leading Index yet.

Scott Minerd, with Guggenheim, has researched the impact of the previous shutdowns:

"There have been 17 U.S. federal government shutdowns since 1976. Excluding drastic moves in commodity prices and bond yields in the late 1970s, analysis of eight occasions during the past 30 years reveals that U.S. equities and the dollar tend to decline during shutdown periods, while gold and commodities tend to perform well. Shutdown periods do not appear to have a significant effect on 10-year Treasury yields. Historically, when a shutdown ends, market performance reverses quickly, and Treasury yields fall by an average of 22 basis points over the following 10 days. The economic impact of a shutdown largely depends on its duration. According to consensus estimates, a week-long shutdown would cut annualized GDP growth by approximately 25 basis points in the fourth quarter."

Equities were down for the week after hitting the overbought territory two weeks ago. Bond prices were mostly up for the week. The charts below show the normal trading ranges for various indices for the last six months. The red (or green) area indicates 2-3 standard deviations above (or below) the normal 21 day trading range. The gray area indicates 1-2 standard deviations above (or below) the normal 21 day trading range.

There were not any updates to the International Leading Indices during the week. The Leading Index for the International Developed Markets (EFA) is at 3.51%. The Leading Index for International Emerging Markets (EEM) is at 3.84%. On the chart below, you can click on the blue and red buttons to see the Leading Indicator growth rate and an ETF for each country.

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These charts have limitations.  Economic data is often revised after the fact.  The market is forward looking and anticipates future events.  The unexpected can and will happen.  The market is continually changing.  The conditions of the past are different from the present.  Past performance is not an indication of future performance.