What Are The CFNAI Implications For Troubling Times?

The UltraPro Short QQQ (SQQQ) is one of the inverse-leveraged exchange-traded fund (ETF) that is tracking the Nasdaq-100 Index. This index is composed of the largest companies that are both domestic and international. It is listed on the Nasdaq stock market but it excludes financial institutions. The investment is requesting daily investment results, before fees and expenses. These are corresponding to three times (3x) the daily performance of the NASDAQ-100. The fund invests in financial instruments are having ProShare Advisors and they are produced daily returns consistent with the fund’s investment objective. This index is including 100 of the largest domestic and international non-financial companies that are listed on The Nasdaq Stock Market based on market capitalization. The fund is non-diversified. UltraPro TQQQ at https://www.webull.com/quote/nasdaq-tqqq is one of the largest with assets under management of $4.31 billion at the end of the fourth quarter. TQQQ is also one of the more closely traded leveraged ETFs.

The CFNAI Implications

The Chicago Fed National Activity Index (CFNAI) sub-indices have helped identify U.S. expansions and recessions with 95% accuracy in the past 18 years. This is an often-ignored index released monthly  that is providing a single weighted average of 85 indicators slotted into four categories:

  • Production and Income
  • Employment, Unemployment, and Hours
  • Personal Consumption, and Housing
  • Sales, Orders, and Inventories

This economy has been devastated by COVID-19 and demand has plummeted to new lows. They are in the middle stage of the pandemic and there’s no clarity on how the situation will pan out. While it is true that many states are reopening, but the situation is yet to play out.

Summing Up

  • Demand for goods is falling and many bankruptcies are expected going forward. They are needed to understand is that the CFNAI is a monthly number. Sure, things will be getting worse for April 2020, but there will be a pick-up in May 2020.
  • The CFNAI data is likely to hit its bottom in April, which should hold so long as the reopening is balanced and cautious, and people obey Governors’ orders.
  • This is the time to get tactical and plan investments based on what the macros are telling us. The loudest buzz going around in the market is that retail is deadand e-commerce will be killing brick and mortar.
  • Point is that if they are thinking tactically and analyze finer details, they can be picking winners in any industry, no matter how badly it may be performing.

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