A problem this market presents to “asset liability managers” (ALM) is that the usual negative correlation between risky equity and risk free notes, strips, and bonds is approaching 0, and at times has been positive.

For instance in the 2008 to 2009 crash in risk assets, in equity markets, Us Treasurys soared in price with long duration increasing in price by 50% to 60%. This had large ALM problems survive.

Now, as correlation approaches 0, there is no offset.

A Markowitz type portfolio construct will not provide offset from riskless fixed income to equity declines.

The “risk premium” for risk free is derived, the increase in yield required to extend duration - per year in basis points.

The annual change in NGDP priced into the market is derived for that change in 7 years.

This can be seen as the growth potential in the US economy.

The US economy has, according to a forward Fisher Effect logic, increased as the Federal Reserve actions have raised long term rates. This rise has more than offset the drop in the term premium towards 0.

The “basis” of NGDP for 7 years is netting NGDP level in 7 years to current dollars NGDP.

The basis is the implicit growth priced into the US economy.

The basis is given in both then current dollars and then in percentage of the current NGDP.

The current dollars instantaneous NGDP, the NGDP level expected in 7 years, and then the basis of that 7 year forward NGDP level is used to qualify equity values overtime.

## calculating recursion for 4607 datapoints
Log SP500 to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-06-19 -7.221409 1.510369 0.7887712
2008-06-20 2022-04-25 -20.857929 2.898840 0.9735488
2022-04-26 2023-01-07 12.193511 -0.384399 0.0933943 

## calculating recursion for 4607 datapoints
Log SP500 to Log NGDP 7 Years Forward
Start_Segment End_Segment Intercept Slope r2 Segment_Length
2008-06-19 2022-04-26 -20.844882 2.897511 0.9734577 3476
2004-09-20 2008-01-16 -9.876491 1.789934 0.8942766 851
2022-04-26 2023-01-07 12.193511 -0.384399 0.0933943 175
2008-01-16 2008-06-19 -16.864665 2.506785 0.2255396 104 

## calculating recursion for 4607 datapoints
Log R2000 to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2007-12-31 -13.54510 2.111041 0.8698990
2008-01-02 2022-01-18 -18.97562 2.649141 0.9298458
2022-01-19 2023-01-07 16.85110 -0.916138 0.3157395 

## calculating recursion for 4607 datapoints
Log W5000 to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-01-16 -9.351447 1.976583 0.9159041
2008-01-16 2008-06-26 -16.840439 2.745007 0.2395928
2008-06-26 2022-04-27 -18.284214 2.875225 0.9676468 

## calculating recursion for 4607 datapoints
Log BRK to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2004-10-20 53.39350 -5.229508 0.8382162
2004-10-20 2005-03-15 -36.11973 4.250173 0.8183007
2005-03-15 2022-06-14 -22.92551 2.835803 0.9651442
2022-06-14 2022-08-19 -33.80005 3.881256 0.8870406 

## calculating recursion for 4607 datapoints
Log BA to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-03-03 -36.51345 4.2493184 0.9164111
2008-03-03 2020-06-03 -50.83890 5.6790599 0.9448945
2020-06-03 2023-01-07 13.93685 -0.8615573 0.1286908 

## calculating recursion for 4607 datapoints
Log AMZN to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2021-06-17 -79.75917 8.463733 0.9666563
2021-06-17 2023-01-07 46.14126 -4.062684 0.7952549
NA NA NA NA NA 

## calculating recursion for 4607 datapoints
Log MSFT to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2013-04-23 -7.593505 1.104237 0.3078788
2013-04-23 2020-01-15 -58.928390 6.389639 0.9828477
2020-01-15 2022-01-13 -26.616445 3.199249 0.9441898
2022-01-13 2023-01-07 24.174143 -1.828133 0.6448717 

## calculating recursion for 4607 datapoints
Log BA to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2008-03-03 -36.51345 4.249318 0.9164111
2008-03-03 2020-06-12 -50.75425 5.670313 0.9444440
2020-06-12 2020-11-09 55.34932 -5.030758 0.5105598
2020-11-09 2023-01-07 25.95286 -2.045848 0.4694595 

## calculating recursion for 4607 datapoints
Log JPM to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2005-10-21 19.17860 -1.696676 0.6987839
2005-10-21 2007-07-19 -40.28687 4.573375 0.9112111
2007-07-19 2022-04-05 -32.21422 3.690442 0.9378168
2022-04-05 2022-10-21 19.96265 -1.496071 0.3664099
2022-10-21 2023-01-07 -11.80832 1.630409 0.3351792 

## calculating recursion for 4607 datapoints
Log COST to Log NGDP
Start_Segment End_Segment Intercept Slope r2
2004-09-20 2004-11-05 -183.39023 19.79538 0.9644846
2004-11-05 2005-04-21 42.87472 -4.16408 0.7325584
2005-04-21 2022-07-15 -40.50227 4.61715 0.9786008