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Macro research
Ineichen Research & Management
(“IR&M”) is an independent research
firm focusing on investment themes
related to absolute returns and risk
management.
Q2 2016
IR&M contact:
Kieger Macro Update
Executive summary

GDP growth is currently positive and was at around 1.6% y/y in Q4
2015, a small fall when compared to Q2 and Q3 2015. This averaged
global growth rate has been abnormally stable which we interpret as
positive. World economic growth is expected to grow at a rate of
around 3.0-3.5% from 2016 to 2018 based on current consensus
forecasts. These forecasts seem quite optimistic and are subject to very
mild downward revisions . India and China are expected to grow this
year at a rate of 7.5% and 6.5% respectively. Russia and Brazil are
expected to remain in recession during 2016.

Macro risks have eased a bit based on one indicator and when
compared to our last Macro Update in January.

Leading economic indicators (LEI) peaked in late 2013/early 2014 and
have been falling ever since. The leading indicator for the United States
has been falling since August 2014. It is important to stress that the
decline is very mild at the moment, very unlike prior to the financial
crises of 2008.

Purchasing managers’ indices (PMI) have risen quite strongly in March.
The average PMI now stands at 51.2 which compares to 50.8 in
December 2015 and 50.4 in October. The average PMI peaked at
around 52 at the end of 2013. These changes are abnormally minor,
i.e., the situation suggests stability rather than overall decline or
acceleration.

Consumer sentiment on average has changed negative in a meaningful
way over the past quarter. The worsening in January and February
were both abnormally strong. US consumer sentiment has so far not
worsened dramatically.

Inflation: In many industrialised and indebted economies, inflation
remains low, or negative, and below the target of the monetary
authorities. “Flation risk” is not a short-term concern.

Notable: US economic health check suggests that there are a couple of
red flags presently.
Alexander Ineichen CFA, CAIA, FRM
+41 41 511 2497
[email protected]
www.ineichen-rm.com
Kieger contact:
Andre Konstantinow
+41 44 444 1851
[email protected]
www.kieger.com
Provided compliments of:
Important Disclosure: Kieger AG has
paid Ineichen Research & Management
(“IR&M”) for the preparation of this
material and is providing it to you for
general informational purposes only.
IR&M is not affiliated with Kieger AG
and has independently prepared this
material and the views and opinions
expressed herein.
Kieger Ma cro Upda te Q2 2016
Apri l 2016
Content
The macro perspective ................................................................................. 3
GDP growth: low and abnormally stable .................................................... 3
Macro risks: red flags easing...................................................................... 5
Leading economic indicators: falling moderately ........................................ 6
PMI: above 50 and rising........................................................................... 7
Consumer sentiment: falling strongly......................................................... 8
Inflation: low and very stable .................................................................. 10
Outlook: consensus mildly positive .......................................................... 11
Exhibit of the quarter: US economic health check ..................................... 12
About IR&M and Kieger AG......................................................................... 13
Inei chen Resea rch and Management
Pa ge 2
Kieger Ma cro Upda te Q2 2016
Apri l 2016
The macro perspective
“Our analysis leads us to believe that
recovery is sound only if it does come of
itself. For any revival which is merely due
to artificial stimulus leaves part of the
work of depressions undone and adds, to
an undigested remnant of
maladjustments, new maladjustments of
its own which has to be liquidated in turn,
thus threatening business with another
crisis ahead.”
—Joseph A. Schumpeter (1883-1950),
Austrian economist
GDP growth: low and abnormally stable
Average real GDP is positive and abnormally stable at around 1.6%. Table 1 shows real
year-on-year GDP (seasonally adjusted) for a range of economies. We have colourcoded the data to show i. highs (green) and lows (red), ii. the correlation among
economies, and iii. the past and current trend. The arrows show the direction of the
Global economic growth is positive at
around 1.6% and this growth rate is
low and abnormally stable
latest move. The average for the world is equally weighted.
Ta bl e 1: Gl obal real GDP, SAAR (seasonally a djusted a nnual ra te)
Q1 2006 to Q1 2015
Q2 15 Q3 15 Q4 15 r
1.7
1.8
1.6 
2.7
1.1
-3.0
2.1
1.1
-4.5
2.0 
0.5 
-5.9 
2.4
1.2
1.6
1.6
1.1
0.6
3.2
2.2
0.8
1.6
1.7
1.2
0.8
3.4
2.1
0.4
1.6
1.3
1.4
1.0
3.5


0.7
7.0
-4.6
7.6
2.0
2.2
1.7
1.7
6.9
-3.7
7.7
2.7
2.8
1.8
0.7
6.8
-3.8
7.3
3.0
3.1
1.8










Average
Americas
USA
Canada
Brazil
Europe
UK
Switzerland
Eurozone
Germany
France
Italy
Spain
Asia and RoW
Japan
China
Russia
India
Australia
South Korea
Singapore
Source: IR&M, Bloomberg.
Inei chen Resea rch and Management
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Kieger Ma cro Upda te Q2 2016

Very little has changed when judged by hard GDP data. The average growth rate is
abnormally stable. Q4 2015 was a bit weaker than the previous two quarters.

The two trends that stick out in Table 1 are Brazil and China. Brazil continues to
worsen. This means the recession is accelerating rather than in an easing mode.
The corruption affair around Petrobras and the resultant political instability are
further worsening the situation. Whether the upcoming Olympics are an economic
blessing or a curse, we’re not quite sure. China is in what some people call a
“growth recession”. The growth rate has been falling for many years and
continues to do so. We believe this decline in the growth rate is not cyclical but
structural. China’s economy has reached a size where the law of large number
suggests that it will never move back again to growing at 10-12%. We recommend
treating China as part of the industrialised world, rather than an emerging market.
From that viewpoint, a growth rate that is higher than, say, 4% is respectable.

Russia too remains in recession. Unlike Brazil, the growth rate in Russia stopped
worsening, i.e., is negative but not becoming more negative.

India is the fastest growing economy in Table 1. However, India’s statistics ministry
in January 2015 radically revised its gross domestic product calculation
methodology. Despite repeated attempts by the ministry to explain how it
changed the method and why, many economists remain suspicious of the new
calculations. The revised GDP is controversial as the new growth numbers do not
fit with other indicators which suggest the Indian economy is doing reasonably
well but not as well as implied by the new GDP figures .

The Eurozone is mixed. Italy for example came out of recession in Q1 2015 and
saw its economic growth rate increase ever since coming out of recession and this
despite mixed reports on the speed of Renzi’s reforms. Italian consumer sentiment
reached a multi-year high just recently. Spain, where reforms started in 2012 and
are perceived as much more successful than in Italy, came out of recession in Q3
2014 and had a rising GDP growth rate ever since. (The reason Spain’s stock
market is underperforming other European bourses is because of Spain’s
corporate links to emerging Latin America.) Germany, the most important
economy in the Eurozone, is positive but most likely past mid-point of the current
business cycle. The GDP growth rate is not rising and various economic sentiment
indicators suggest that Germany is off its recent business -cycle peak.
Inei chen Resea rch and Management
Apri l 2016
Pa ge 4
Kieger Ma cro Upda te Q2 2016
Apri l 2016
Macro risks: red flags easing
In our last quarterly update the following graph looked very disturbing as the set of
indicators was then approaching our “red flag zone,” i.e., a level that was reached in
the first half of 2008 and that today serves us as a warning system. The last two
monthly observations suggest economic improvement.
“History does not repeat itself - at
best it sometimes rhymes.”
—Ma rk Twa in (1835-1910), American
a uthor
Figure 1 shows the “path” of an economic indicator for the world economy (horizontal
axis) vs an indicator for expectations thereof. Some points are marked in dark blue,
including the last three observations. “Red flag zone” refers to H1 08 that should, if
history rhymes, give investors ample time to fasten their seatbelts.
Fi gure 1: Gl obal economy a nd expectations
Source: IR&M, Bloomberg, Sentix. Notes: Based on Sentix Economic Indices Global Aggregate (Current
Situation and Expectations). Full “path” since 2003 is shown.

This exhibit worried us a bit while putting together the Q1 update in early January.
The set of indicators have continued to worsen in February but recovered roughly
two-thirds of the January 2016 fall in March and April of this year.
Inei chen Resea rch and Management
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Leading economic indicators: falling moderately
Table 2 shows a selection of leading economic indicators (LEI) for the past ten years.
While these leading indicators are often lagging indicators, they do serve a purpose as
they often trend continuously in one direction. This means these trending indicators
are useful for confirming an existing economic trend, even if the turning points only
become apparent slowly.
Leading economic indicators peaked
in late 2013/early 2014 and have
been falling ever since
Ta bl e 2: Selection of leading economic i ndicators
Feb 2007 to Oct 2015
Nov 15 Dec 15 Jan 16 r
99.8
99.7
99.6  OECD Composite
99.2
99.3
97.8
99.0
99.2
97.8
98.9  United States
99.1  Canada
97.7  Brazil
100.6
99.9
100.8
101.0
101.5
99.3
99.6
100.6
99.9
100.9
101.0
101.4
99.2
99.6
100.5
99.8
100.9
101.0
101.4
99.1
99.5
97.8
99.8
100.0
98.7
99.8
101.2
98.3
99.5
100.8
97.7
99.6
100.0
98.4
99.7
101.2
98.2
99.5
101.0
97.6
99.5
100.1
98.0
99.7
101.2
98.2
99.5
101.2
Eurozone
Germany
France
Italy

Spain
 United Kingdom
Switzerland


China
Japan
India
Russia
Australia
South Korea
 Indonesia
 South Africa
 New Zealand





Source: IR&M, Bloomberg, OECD.

The leading indicator for the whole worl d, the OECD Composite has peaked at
100.4 in January 2014 and has been falling very moderately ever since. The colourcoding went from light green to light orange. This means the leading indicator for
the whole World (first row in the table) went from moderately positive to
moderately negative over the past two years. This makes the change comparable
to 2011 but not to 2007. In 2007 the changes were much more abrupt.

Very little has changed in this table when compared to our last update from
January 2016. One change, as mentioned, is that the composite index fell further,
albeit, also as mentioned, taking only baby steps. A further change is the number
of green arrows pointing up. A green arrow constitutes an upward trend of at least
three positive changes. In our update from January this year there were eight,
currently they’re only three green arrows. Our interpretation of this fact is that
the global economy is worsening, albeit at a low velocity at the moment.

The leading indicator for the United States peaked in August of 2014 and has been
in decline ever since. Our interpretation of this fact is that the US is further ahead
in the business cycle than most other economies. This, together with the fact that
the Fed has started to tighten in December 2015, means that the US has passed
most likely the mid-point of this current business cycle.
Inei chen Resea rch and Management
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Apri l 2016
PMI: above 50 and rising
Table 3 shows a selection of global Purchasing Manager Indices (PMI) for the
manufacturing sector. The PMIs are diffusion indices and oscillate around 50 between
0 and 100. A reading of above 50 means that more survey participants observed an
improvement, a figure below 50 means that there were more survey participants who
reported a deterioration. A reading of exactly 50 implies neither positive nor negative
change. A colour-coding is applied to show a rising or falling trend but also to
On average the PMI indices are
around 50 and have been falling
moderately since early 2014
distinguish regions with economic strength from those with economic weakness.
Ta bl e 3: PMI
3-year
High Low
A key feature of the PMI surveys is
Feb
Mar r
54.9 47.3
50.3
51.2 
58.1 48.0
55.6 47.5
50.8 43.8
49.5
49.4
44.5
51.8 
51.5 
46.0 
58.7
57.3
54.0
56.5
52.1
55.6
55.8
50.8
51.6
51.2
50.5
50.2
52.2
54.1
51.0
53.2
51.6
50.7
49.6
53.5
53.4







50.1
48.0
49.3
51.1
53.5
48.7
49.1
49.7
48.3
52.4
58.1
49.5






Apr 2013 to Jan 2016
50.8
47.0
48.3
48.6
46.4
47.3
48.1
56.6 49.1
51.7 47.2
51.8 47.6
54.5 48.5
58.1 42.0
51.1 46.1
Source: IR&M, Bloomberg.
that they ask only for factual
information. They are not surveys of
World average
Americas
USA (ISM)
Canada (Markit)
Brazil (Market)
Europe
UK (Markit)
Switzerland (CS)
Eurozone (Markit)
Germany (Markit)
France (Markit)
Italy (Markit)
Spain (Markit)
Asia Pacific
Japan (Markit/JMMA)
China (Caixin)
Russia (Markit)
India (Markit)
Australia (AIG)
South Korea (Markit)

The average PMI in Table 3 was 51.2. This compares to 50.4 in both our June and
October update of last year and 50.8 in December 2015. In other words the
changes are minor on an average level. The last time the average was at the
March 2016 level at 51.2 was in January 2015.

The most important PMI and the most actively followed indicator is arguably the
manufacturing PMI for the United States. The US PMI fell below the all -important
threshold of 50 in November 2015 whi ch, in combination with the first rate hike
by the Fed in December, triggered recession probabilities to rise. However, the US
PMI rose sharply in March, from 49.5 to 51.8 which is a 1.6 standard deviation
move. This strong move, in combination with strong upward moves in several
regional Fed indicators, resulted in recession talks to dissipate for the moment.

The PMI for China also rose strongly. The private PMI rose from 48.0 to 49.7 as
shown in the table. The official PMI rose from 49.0 to 50.2 (not shown in the table)
as did the services PMI. Australia, which we like to view as a proxy for things
economic related to China, also rose strongly to 58.1, a level last reached in 2002.

Japan fell below 50 spurring the fear that Japan is heading for its’ next (typically
mild) recession.
Inei chen Resea rch and Management
opinions, intentions or expectations
and the data therefore represent the
closest one can get to “hard data”
without asking for actual figures from
companies.
Pa ge 7
Kieger Ma cro Upda te Q2 2016
Apri l 2016
Consumer sentiment: falling strongly
Table 4 shows a selection of consumer sentiment indicators for the past eight years.
We show all figures in percentile terms. The period high is set to 100 and is shown
green. The period low is set to 1 and is red. The table allows comparing a trend of a
region or country separately (horizontal view) but also allows a comparison between
different economic entities (vertical view).
Consumer sentiment is falling more
heavily than in our update from
January this year
Ta bl e 4: Consumer s entiment
Apr 2008 to Jan 2016
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Feb Mar
Apr
r
54.0 50.0 49.8
 World
78
n.a.
5
76
n.a.
5
n.a.
n.a.
n.a.



Americas
USA
Canada
Brazil
83
49
77
93
60
98
94
82
n.a.
74
94
52
98
91
n.a.
n.a.
n.a.
91
n.a.
n.a.
n.a.







Europe
UK
Switzerland
Eurozone
Germany
France
Italy
Spain
38
34
98
40
13
n.a.
n.a.
n.a.
29
25
n.a.
n.a.
n.a.
n.a.
n.a.





Asia and RoW
Japan
China
India
Australia
South Korea
Source: IR&M, Bloomberg.

In our last update we titled this page “falling moderately,” essentially a two-word
summary of the page for the speed reader. We changed this title to “falling
strongly” because the speed of the fall accelerated during the first quarter of this
year. (We measure this by the standard deviation of the monthly changes.) In
December 2015 the average was 61.7 (first line in the table). The three
consecutive averages were 56.7, 54.0 and 50.0 so far for March 2016. The fall to
February and March were 1.4 and 1.0 standard deviation events, i.e., more
significant than just random noise. Our interpretation of this fact is that the trend
is more meaningful. This means the investor’s conviction in falling consumer
sentiment can be higher as a result. A horizontal comparison of the first line in the
table allows assessing where we stand today.
The US consumer is the most important as the United States is the super-power-inchief, the US economy is the largest in the world when measured by GDP and US
consumption is roughly seventy percent of the $17 trillion economy. Currently there
are no alarm bells going off regarding the US consumer. Figure 2 contrasts consumer
confidence as measured by the University of Michigan with expectations. In this exhibit
we look for a sharp move or trend towards the lower left hand corner as an early
warning sign for an upcoming recession.
Inei chen Resea rch and Management
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Kieger Ma cro Upda te Q2 2016
Apri l 2016
Fi gure 2: US consumer s entiment
Source: IR&M, Bloomberg. Note: The light blue line shows all combination of consumer confidence
sentiment (main index) and expectations thereof since January 1980. Most recent path is highlighted.

The latest six changes were moderately negatively biased but were minor. We
have marked all observations from 2015 with a dotted oval in Figure 2. All
observations since January 2015 are within the upper right quadrant of the
exhibit.

Based on the sum of these two indictors the US consumer is in the 49 th percentile
(100th=best) since 1980. This compares to 87 th at the beginning of 2015 and 35 th
in December 2013 and August 2014. A red flag would constitute a fast (high
standard deviation) deterioration to the December 2012 level that is also marked
in the exhibit above. Such a move was the warning sign at the end of 2007 and at
the beginning of 2008.
Inei chen Resea rch and Management
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Kieger Ma cro Upda te Q2 2016
Apri l 2016
Inflation: low and very stable
In many industrialised and indebted economies, inflation is low, or negative, and
materially below the target of the monetary authorities. Table 5 shows the current
annual consumer price inflation for a selection of economies. The first row shows an
equally weighted average excluding Brazil and Russia.
Ta bl e 5: Consumer price i nflation
Apr 2008 to Jan 2016
Feb-16 Mar-16 r
0.34
0.34
Average ex. Brazil and Russia
1.00
1.40
10.36
n.a.
n.a.
n.a.
United States
Canada
Brazil
0.30
-0.80
3.10
0.39
-0.20
0.00
-0.20
0.30
-0.20
-0.80
0.40
-0.10
-0.52
0.30
2.30
8.10
1.30
-0.80
n.a.
n.a.
n.a.
n.a.
-0.10 
0.30 
-0.20
n.a.
-0.30 
-0.80
n.a.
n.a.
n.a.
United Kingdom
Switzerland
Norway
Sweden
Eurozone
Germany
France
Netherlands
Italy
Spain
Portugal
Ireland
Greece
n.a.
Japan
n.a.
China
n.a.
Russia
1.00  South Korea
n.a.
Singapore
Source: IR&M, Bloomberg.

Flation risk is currently not a short-term concern. “Flation risk,”i.e., the risk of too
much inflation or too much deflation has not changed over the past quarter. The
colour coding of Table 5 allows to comparing the difference in change to the
period in 2008. When compared to the financial crisis of 2008 -2009, inflation is
very stable. The average shown in the ta ble was 0.30-0.31 in November and
December 2015 and currently stands at 0.34 for both February and March 2016.

Many economies have inflation rates that are still below their announced target
rate or target range. The environment of “wanted consumer price inflation” has
not changed. In some cases the inflation rate is negative. This means all the
monetary expansion has not resulted in consumer price inflation but in asset price
inflation, inflating nearly everything from equities to bonds and from real estate to
farm land and from classic cars to art, stamps and vintage wine.

Consumer price inflation, as measured in the table above, has been low and stable
for quite some time. All the various quantitative easing (QE) efforts and expansion
of central banks’ balance sheets have not resulted in a material rise in consumer
price inflation.

“Whilst we are all blaming the
negative rates on the BOJ or ECB, the
central banks are just reflecting the
reality of the slowing global GDP and
inflation as world productivity
continues to fall.”
—Andy Lees, AML Ma cro,
17 February 2016
“Insanity: doing the same thing over
and over again and expecting
different results.”
—Al bert Einstein
During 2015 the range of average inflation, as in the table above, was from -0.07
in January 2015 to 0.37 in December. This means during 2015 consumer price
inflation, on average, has risen, albeit only very modestly. Average inflation has
been within this range so far year-to-date.
Inei chen Resea rch and Management
Pa ge 10
Kieger Ma cro Upda te Q2 2016
Apri l 2016
Outlook: consensus mildly positive
World economic growth is expected to grow at an annual rate of around 3 .0% in 2016
and 3.4% in 2017. Table 6 shows an economic outlook for a selection of countries for
the years 2015-2018 including a measure as to how the forecasts for 2016 and 2017
were revised since December of last year. We applied a colour-coding to both
forecasts and revisions to highlight the extreme values.
World economic growth is expected
to grow at around 3%
Ta bl e 6: GDP forecasts and revisions
2015
World
Americas
United States
Canada
Brazil
Change GDP forecast
since 31. Dec 2015
2016
2017
n.a.
3.00
3.40
3.50
-0.30
-0.10
2.40
1.20
-3.70
2.10
1.40
-3.55
2.25
2.00
1.00
2.15
2.15
1.50
-0.40
-0.40
-1.05
-0.15
-0.10
-0.10
2.20
0.80
1.50
1.50
1.10
0.70
3.20
1.95
1.20
1.50
1.60
1.30
1.05
2.70
2.20
1.60
1.60
1.60
1.45
1.20
2.30
2.20
1.80
1.65
1.55
1.40
1.10
1.90
-0.35
0.60
6.90
6.90
-3.70
2.30
2.60
0.60
6.50
7.50
-1.30
2.60
2.60
0.55
6.30
7.70
1.25
2.85
2.90
0.70
6.35
7.80
1.70
3.00
2.95
-0.50
Europe
United Kingdom
Switzerland
Eurozone
Germany
France
Italy
Spain
Asia Pacific
Japan
China
India
Russia
Australia
South Korea
Real GDP (y/y, %)
Consensus forecasts
2016
2017
2018
-0.20
-0.20
-0.10
-0.25
0.05
0.10
-1.10
-0.30
-0.05
-0.10
-0.05
0.10
-0.10
-0.25
-0.15
-0.15
Source: IR&M, Bloomberg. Based on consensus forecasts.

The consensus forecasts for “World” at 3-3.5% for 2016 to 2018 GDP (first row in
Table 6) looks quite optimistic. The consensus expects not only world growth to be
higher than in previous years but the growth rate to accelerate too. However,
these forecasts have a tendency to be revised downwards throughout the year.
For example, forecasts for World GDP for 2016 were estimated to be 3.3% in our
last update from January this year. This forecast has now fallen to 3.0%. Forecasts
for 2017 have fallen from 3.5% to 3.4%. These are mild revisions but downward
revisions nevertheless.

The most severe revisions to GDP forecasts were in Brazil and Russia, i.e., remain
in economies that are related to commodities, especially to energy. Both
economies are not expected to exit their recession during 2016. Both economies
are highly corrupt and the current corruption-related turmoil in both nations is not
easing. The recently leaked “Panama Papers” are very unlikely to improve the
situation.

Forecasts for Japan in 2016 were also revised sharply from 1.2% to 0.6%. This
downward revision is consistent with various economic sentiment surveys.

The only upward revisions were in Spain and India. These revisions were small
though.

GDP in Switzerland is expected to pick up and accelerate. This is entirely
inconsistent with industrial production that is still a big flag. (See ‘exhibit of the
quarter’ in our last update.)
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Kieger Ma cro Upda te Q2 2016
Apri l 2016
Exhibit of the quarter: US economic health check
Figure 3 is an economic health check for the US economy. We selected different
indicators related to different aspects/parts of the economy including, in the lower
part of the table, earnings estimates and price momentum of the stock market; for
many the ultimate leading economic indicator. Then we chose a red flag criterion that
should function as a warning sign of the next recession.
The months where the criterion is met are marked red. The top line counts the red
flags. The criteria were chosen to pop a red flag prior to the recession. With some
indicators, the red flag is up prior to the Great Recession but not during the recession,
e.g., some indicators measuring consumer sentiment or housing. The reason for this is
that we introduced a peak, i.e., we measure not the absolute fall of the indicator, but
the fall from a certain (high) level. With other indicators the red flag goes up prior to
the calamities of H2 2008 and stays up for a long time thereafter, e.g., the leading
economic indicator (“LEI”) of the Conference Board (third line under “general
economy”) or most indicators on the labour market.
“For at least five years, we have been
hearing that the United States is on
the verge of slipping into a
recession… We read that recession is
“imminent” or “100 percent
guaranteed in 2016” as two pundits
declared recently. The language is not
designed to inform or to describe
probabilistic, data-driven models of a
complex and nuanced global
economy; rather, it is “look at me”
talk and nothing more than
marketing.”
—Ba rry Ri tholtz, Washington Post,
1 Apri l 2016
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
Fi gure 3: Health check of US economy (as of 6 April 2016)
6
Indicator
# Red flags
General economy
ISM PMI,Manuf.
ISM PMI,Non-Manuf.
LEI (Conf. Board)
LEI (Conf. Board)
Chicago (CFNAI)
Philly
Consumer
Sent. (Conf. Board)
Sent. (UoMichigan)
Restaurant perform.
Eating out
Labour market
NFP
Jobless claims
Unemployment
Quit rate
Temporary help
Housing
Housing starts
NAHB
Construction, non-res.
Earnings estimates
SPX EPS est.
SPX Finan. EPS est.
Markets
S&P 500
Yield curve
Red flag criteria
<50 for 2 months and falling*
<50 for 2 months and falling*
Falling***
DD>5% and falling**
<-0.7% for two months
<-20 and falling*
>93 (avg.) and falling**
>85 (avg.) and falling**
Falling***
Falling***
<0 and falling**
>350k and rising*
>4.5% and rising**
Falling***
Falling***
>1500k and falling**
>60 and falling***
>10% y/y and falling
Falling***
Falling***
50day < 200-day mov. avg.
Inverted (2Y > 10Y yield)
Source: IR&M, Bloomberg. The Restaurant Performance Index is from the National Restaurant Association. “Eating out” is from Bureau of Econo mic Analysis.
Quite rate and Temporary Help are from Bureau of Labor Statistics. Construction is from US Census Bureau. DD=Drawdown from previous peak;
CFNAI=Chicago Fed National Activity Index; Philly=Philadelphia Fed Business Outlook; NFP=Non -farm payrolls; NAHB=National Association of Home Builders
Market Index; SPX=S&P 500 Index. * Based on three-month moving average. **Based on six-month moving average. *** Based on 12-month moving
average.

There are currently six red flags in this economic “health check.” This compares to
seven in our update from Q1 2016 and three in our update from Q4 2015. This
means the economic environment ha s not worsened over the quarter. However,
during most of the 2011 to summer 2015 period; this exhibit showed no red flags
at all.
Inei chen Resea rch and Management
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Kieger Ma cro Upda te Q2 2016
Apri l 2016
About IR&M and Kieger AG
IR&M
Ineichen Research and Management (“IR&M”) is a research boutique focusing on
investment themes related to risk management, absolute returns and thematic
investing. IR&M was founded by Alexander Ineichen in October 2009, has an
institutional investors’ orientation, and is domiciled near Zug, Switzerland.
Kieger AG
Kieger is an independent wealth and asset manager. Kieger offers bespoke investment
solutions for clients with a long term investment horizon. The team has been managing
and implementing multi -asset solutions for institutional investors for almost 15 years
and the firm seeks to build long-term partnerships. Kieger’s Headquarter is based in
Zurich with a branch office in Lugano and its subsidiary in Luxembourg (CSSF regulated)
manages a broadly diversified portfolio of investment funds for its investors.
Kieger develops and manages investment solutions that encompass all major
traditional and alternative asset classes including a dedicated Health Care Fund
management business.
Copyright © 2016 by Ineichen Research and Management AG, Switzerland
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