Société Générale has a very interesting piece out this morning looking at the notion of economic surprises and a double-dip scenario:
“The economic surprise indicator has returned to very low levels, indicating that a lot of negative surprises are now discounted. We don’t believe that the indicator will remain low for long as the drop is mainly due to a combination of several exceptional factors in H1 2011, i.e. the earthquake and nuclear threat in Japan, the hurricane in the US and the oil price spike owing to turmoil in the ME/NA region.”
The economic surprise indicator is SocGen’s proprietary measure of deviation of economic data surprises, calculated as the difference between figures released and figures expected by consensus.
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Number of news articles related to double dip
click for larger chart
Source Bloomberg, Citigroup, SG Cross Asset Research
Their proprietary newsflow indicator suggests that doubledip scenarios have come back to the forefront of the news, supporting the bond market but penalising cyclical assets.
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Newsflow Analysis
Source: Dow Jones, SG Newsflow Watch, SG Cross Asset
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See also: Citigroup Economic Surprise Index, Trader’s Narrative
Source:
Don’t believe the doom merchants
We don’t ascribe to the double-dip scenario: markets remain liquidity-driven
Société Générale Cross Asset Research, Q3 2011
http://www.sgcib.com/solutions/global-markets/cross-asset-research/cross-asset-research
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