The Financial Forecast Center™
Independent Financial Forecasts Since 1997
Trying to determine the cause of any one financial indicator within a complex system is a difficult and very tricky proposition. It is impossible to say with 100%, or even possibly 90%, certainty that X causes Y when both X and Y are part of the same complex system. For instance, it is impossible to say the stock markets are caused by interest rates.
Why? Because of the presence of feedback cycles and the presence of many different causes. For instance, stock markets may be partially caused by interest rates and interest rates may be partially caused by the stock markets.
It it possible, however, to find hints at causes or to find "potential" causes. Any "cause" found has to be presented humbly as "may be partially caused by."
An interesting piece of research on what global stock markets cause other stock markets.
While a heirarchical cluster analysis of the U.S. economy and global financial markets does not imply causation, it is a very interesting exercise to see what financial indicators behave the same.
Here is a comprehensive cluster analysis of the U.S. economy and financial market indicators.
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