We are at
the inflection point, that spot on the chart where according to Wikipedia the “curvature
or concavity of a curve changes sign from plus to minus or from minus to plus”.
In current real world terms this translates to that point on the charts where
market sentiment turns decisively from optimism to pessimism.
The concave
upwards dome of optimism that for many market participants dates all the way
back to the 1950’s is in the process of being demolished, just like the City of
Pittsburgh’s iconic Civic Arena. The apex of
the dome occurred in the early 1980’s when manufacturing was still a
significant force in the economy, before technology had given Corporate America
the ability to off-shore, outsource and automate every high paying job that
formed the backbone of the middle class.
The charts
in this series all depict different aspects of the economic inflection point. Most of the charts are presented in year over year
percent change format to illustrate how the nominal highs that many indexes
have made recently have been generated by steadily decreasing rates of growth.
In 2008 decades
of expansion flipped to contraction as growth rates collapsed to unprecedented
levels. In technical terms the housing and banking crash that occurred four
years ago was a breakdown where long term growth support levels utterly failed
to prevent a sharp drop on the charts. The deflationary drop did happen; the
central banks flooded the system with cash, and a temporary reflation of the
system was accomplished.
But the
fact remains that the manufacturing jobs are gone for good, and without a
thriving and reproducing middle class the economy will never be able to maintain
a steady rate of expansion. So optimistic expansion becomes pessimistic
contraction, and the point at which that happens is the inflection point. As we
say in Pittsburgh, that’s where we’re at.
