Jason Kirby, a senior editor at Maclean’s, assembled “The most important charts for the Canadian economy in 2016“, with contributions from ‘economists, analysts, investors, and financial bloggers’. This year’s edition is jam packed with 50 charts. (Earlier this year, he put together a similar compendium titled “35 ways to look at the economy on budget day“. Given that some time has passed, it’s interesting to take a second look at the earlier charts.)
I contributed to both sets of charts, but wanted to highlight my latest contribution, and expand on it (ever so slightly).
The first thing to note is that my submissions (from both compilations) are less timely, in a sense, than most of the other charts. They are less timely in that there is nothing really new or topical like some of the great charts that show recent employment trends, perspectives on oil, the loonie, and more. At the same time, I feel that longer term perspectives are as “timely” as ever, if for no other reason than to reiterate that there have been many previous periods of precarity and uncertainty, and yet the world keeps spinning. Well, at least for now.
I actually submitted two charts. The inflation-adjusted (to October 2015 dollars) growth in the headline Canadian stock market index going back to 1920 using an arithmetic index point scale, and then the exact same data using a logarithmic index point scale. Note: these are the price-only data. I don’t have the total return data on hand going back to 1920.
First, let’s look at the chart with an arithmetic scale.
The problem with using an arithmetic scale is that it’s magnifying the recent price moves. If you look at the index moving from 10,000 to 12,000, that 2,000 point move is 20%. But if you go back to the beginning of the chart, that same 2,000 point move, if starting from an index level of 2,000 points, is a 100% move. To adjust for this, we can use a logarithmic scale which essentially makes any vertical moves equivalent on a relative basis at any point along the chart. And when you do that, you see just how much more wild the time leading up to, and including, The Great Depression was, and how what’s been happening lately is really just par for the course in the context of long time horizons.
Hat tip to Catherine Mulbrandon of Visualizing Economics for the inspiration for these charts. She had done something similar for US stocks going back to 1871.