A guide to reading the State of the Economy trajectory chart.
The trajectory chart plots the economy as a dot on a plane, with its recent path trailing behind it. The plane has four quadrants. This guide says what each one has coincided with on this site's record, and how the dot has moved between them.
The two can disagree: Forward Stress can rise while Momentum is still strong. That is why the plane has two axes and not one.
Economy strong · little stress
Momentum is high and Forward Stress is low: the economy is growing and the signs of trouble are quiet.
On this site's record, nearly every month the dot spent here was a month of Expansion: 301 of 303. It is where the economy has spent most of its time.
Where the dot went next: left to Strong · stressed 12 times, down to Soft · calm 9 times and across to Soft · stressed 5 times.
Strong · calm has held 303 of the 545 months since May 1981, never more than 50 in a row. Its longest runs: Apr 1983 – Feb 1986 · Jul 1986 – Feb 1989 · Nov 1992 – Apr 1995 · Mar 1996 – Apr 2000 · Oct 2012 – Jan 2015.
Economy strong · stress building
Momentum is high and Forward Stress is high: the economy is still doing well while the signs of trouble have built up.
A recession began within a year of 22 of its 104 months: 2.3 times the rate for all months (50 of 533). Most times the dot entered this quadrant, though, no recession followed — one began within a year of 7 of its 26 entries.
Where the dot went next: right to Strong · calm 13 times, down to Soft · stressed 11 times and across to Soft · calm twice.
Strong · stressed has held 106 of the 545 months since May 1981, never more than 18 in a row. Its longest runs: May 2000 – Nov 2000 · Apr 2010 – Nov 2010 · Oct 2015 – Oct 2016 · Feb 2019 – Oct 2019 · May 2022 – Oct 2023.
Economy weak · stress high
Momentum is low and Forward Stress is high.
This is where recessions and bear markets have happened. Of the 52 months of recession since May 1981, 49 fell here, and so did 51 of the 71 months the S&P 500 spent falling from a bear-market peak to its bottom; 3 of the 6 bottoms came here.
In 2 of the 5 recessions, Forward Stress reached its low before Momentum did.
Where the dot went next: up to Strong · stressed 14 times, right to Soft · calm 4 times and across to Strong · calm 3 times.
Soft · stressed has held 111 of the 545 months since May 1981, never more than 26 in a row. Its longest runs: Oct 1981 – Feb 1983 · Jul 1989 – Nov 1989 · Sep 1990 – Jun 1991 · Dec 2000 – Aug 2002 · Nov 2007 – Dec 2009.
Economy soft · little stress
Momentum is low and Forward Stress is low: growth has slowed without the signs of trouble building.
On this record it is a brief dip. Of the 9 times the dot dropped in from Strong · calm, it went back to Strong · calm 8 times. A year after a month here, the S&P 500 was higher 22 times in 24.
Where the dot went next: up to Strong · calm 11 times and left to Soft · stressed 4 times.
Soft · calm has held 25 of the 545 months since May 1981, never more than 4 in a row. Its longest runs: Mar 1986 – Jun 1986 · May 1995 – Jul 1995.
The textbook draws the economy circling the quadrants in one direction: from Soft · calm up to Strong · calm, left to Strong · stressed, down to Soft · stressed and back to Soft · calm. In the 45 years of this record the dot went all the way round that way never, and all the way round the other way once. Every edge was crossed about as often each way: 38 moves went counter-clockwise and 40 clockwise, and 10 cut across the middle.
What the record shows instead is back and forth across one line at a time. Between Strong · stressed and Soft · stressed the dot moved down 11 times and back up 14. Between Strong · calm and Strong · stressed it moved 12 times left and 13 back. Between Strong · calm and Soft · calm it moved 9 times down and 11 back.
| Quadrant | What it means | S&P 500 peaks and bottoms here | Longest run · months held |
|---|---|---|---|
| Strong · calm (top right) | Economy strong, little stress | 3 of 5 peaks · 1 of 6 bottoms | Mar 1996 – Apr 2000 · 303 of 545 months |
| Strong · stressed (top left) | Economy strong, stress building | 2 of 5 peaks · 2 of 6 bottoms | May 2022 – Oct 2023 · 106 of 545 months |
| Soft · stressed (bottom left) | Economy weak, stress high | 0 of 5 peaks · 3 of 6 bottoms | Nov 2007 – Dec 2009 · 111 of 545 months |
| Soft · calm (bottom right) | Economy soft, little stress | 0 of 5 peaks · 0 of 6 bottoms | Mar 1986 – Jun 1986 · 25 of 545 months |
| Peak | Close | Fall | Bottom | Back to the peak | Quadrant that month | 3 months earlier | 3 months later |
|---|---|---|---|---|---|---|---|
| Aug 1987 | 329.80 | −30.2% | Nov 1987 | Jul 1989 | Strong · calm | Strong · calm | Strong · calm |
| Aug 2000 | 1,517.68 | −46.3% | Sep 2002 | May 2007 | Strong · stressed | Strong · stressed | Strong · stressed |
| Oct 2007 | 1,549.38 | −52.6% | Feb 2009 | Mar 2013 | Strong · stressed | Soft · calm | Soft · stressed |
| Dec 2019 | 3,230.78 | −20.0% | Mar 2020 | Jul 2020 | Strong · calm | Strong · stressed | Soft · stressed |
| Dec 2021 | 4,766.18 | −24.8% | Sep 2022 | Dec 2023 | Strong · calm | Strong · calm | Strong · calm |
Of 5 peaks, 3 came in Strong · calm, 2 in Strong · stressed, 0 in Soft · stressed, 0 in Soft · calm.
| Bottom | Close | Fall it ended | From the peak | Back to the peak | Quadrant that month | 3 months earlier | 3 months later |
|---|---|---|---|---|---|---|---|
| Jul 1982 | 107.09 | −23.8% | Nov 1980, before the plane's record | Dec 1982 | Soft · stressed | Soft · stressed | Soft · stressed |
| Nov 1987 | 230.30 | −30.2% | Aug 1987 | Jul 1989 | Strong · calm | Strong · calm | Strong · calm |
| Sep 2002 | 815.28 | −46.3% | Aug 2000 | May 2007 | Strong · stressed | Soft · stressed | Soft · stressed |
| Feb 2009 | 735.09 | −52.6% | Oct 2007 | Mar 2013 | Soft · stressed | Soft · stressed | Soft · stressed |
| Mar 2020 | 2,584.59 | −20.0% | Dec 2019 | Jul 2020 | Soft · stressed | Strong · calm | Soft · stressed |
| Sep 2022 | 3,585.62 | −24.8% | Dec 2021 | Dec 2023 | Strong · stressed | Strong · stressed | Strong · stressed |
Of 6 bottoms, 3 came in Soft · stressed, 2 in Strong · stressed, 1 in Strong · calm, 0 in Soft · calm.
The textbook puts bull-market peaks in Strong · stressed and bottoms in Soft · stressed. On this record 2 of the 5 peaks came in Strong · stressed, and 3 of the 6 bottoms in Soft · stressed.
Counting every fall of 10% instead gives 12 peaks since 1981: 7 in Strong · calm, 3 in Strong · stressed and 2 in Soft · stressed. The picture is the same, so the tables count falls of 20%.
How the peaks and bottoms are found: from the month-end closes of the S&P 500 (price). A peak is the highest close since the last bottom that is followed by a fall of at least 20% before any close beats it; the bottom is the lowest close of that fall. The list starts where the plane's record starts (May 1981). Counting dividends, on this site's total-return index between the same months, the Dec 2019 – Mar 2020 fall reads −16.1% and the Dec 2021 – Sep 2022 fall reads −16.7%, so neither would count as a 20% fall. Each month's quadrant is the plane's point-in-time reading: where the data published about five weeks after the month began put it — at least 85% first-published from Sep 2016; earlier years partly use today's revised data, read only once it had been published (how much).
Every count, date and period of the record on this page is read from the plane's monthly data since May 1981; none is typed into the page.