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An unwelcome surprise for economic growth and equity prices Add to ...

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The Citi economic surprise indexes are among the most important and useful indicators developed by major research firms. The problem now is that the U.S. economic surprise index is heading lower in a hurry, signalling the distinct possibility of a slowdown and equity market weakness.

The surprise indexes are a great exemplar of second derivative growth or “change in the rate of change,” one of the most important concepts in investing. The first derivative of growth describes the simple calculation we’re all familiar with. A stock that has generated average profit growth of 8 per cent over five years, for instance, has earnings with a first derivative growth rate of eight.

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