Soft-Data > Hard Data

Is declining sentiment a leading signal? It depends

• If people are worried about the future, does the future become bad? What happened in previous “event driven” recessions?

• if the trade war is the catalyst, can we expect a lag between cause and effect? how long?

• some evidence the clock is already ticking

---

👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. 

---

Soft-Data > Hard Data

Because Random Walk has made quite the big deal about how the actual hard data has been totally a-ok fine, and it’s only the hand-wavy, teenage-angst soft-data that has indicated any kind of Tariff Distress . . .

It bears mentioning that steep drawdowns in the soft data have, in fact, been leading indicators of hard data declines:

Goldman Sachs

While Soft Data turns ~30 days from the catalyst, Hard Data waits another ~40 days before going south.

In other words, when “big bad shifts” happen, the squishy negative feels have been a leading indicator of an actual downturn. And just because the hard data is fine for now, doesn’t mean it will stay fine.

Of course, there are other times when sentiment collapsed, and nothing happened, but then these don’t become “catalyst driven” downturns, so the analysis is a bit post hoc ergo propter hoc.

I am reminded of this glorious chart of Consumer Confidence: