FutureQuant has developed an economic “sizzle” index, to provide an indicator of the level of economic potential in very large economies. While the Sizzle Index itself was conceived during the global financial crisis, it has taken several years to validate the predictive capabilities of the underlying approach.
The Sizzle Indicator has been calculated for the US economy (see below). An economic “heat” peak from the first dot com bubble is clearly visible at the year 2000. The housing bubble of 2005-2006 is also appears. The global financial crisis of 2008 resulted in a literal economic dive off a cliff, and extensive stimulus policy has provided a floor to that drop.
Sizzle Index 1993-2013 (credit FutureQuant)
Where are we at now? Ongoing economic stimulus has kept the floor nearly level, providing savvy investors and financial institutions breathing space to regroup.
FutureQuant has been able to qualitatively forecast the sizzle factor for a period of about 2 years in advance. So far, the forecasts have been valid, although we are moving in uncharted territory.