This chart was shared a good amount last month and I’m a huge fan of The Conference Board, so I figured I’d post one more Monday update.
🔻The Conference Board’s 10 LEIs (Leading Economic Indicators) index declined - barely, by -0.1% MoM - but nonetheless this marks the 21st straight month we’ve seen this historically spot on leading indicator index decline. Not only did 0/10 recessions flagged by the Conference Board end in “no landing”, but now only preceding the mid 1970’s stagflation recession & 2008 GFC did we see more months of consecutive decline. For the benefit of those who don’t know this index from the Conference Board - I get the feeling few take me up on my suggestion to check their website - I copied their 10 combined indicators in this index below.
Financial (3)
•Leading Credit Index
•S&P 500 Index Price
•10YR-Fed Funds Rate (Spread)
Non-Financial (7)
•Consumer Expectations for Business Conditions
•ISM New Orders •Building Permits
•Avg Weekly Hours
•Manufacturers New Orders, Nondefense Capital Goods
•Manufacturers New Orders, Consumer Goods & Materials
•Avg Weekly Initial Claims
For those familiar with macro, you’ll immediately recognize these as extremely reliable leading economic indicators, hence the Conference Board’s 10/10 record. What I find interesting about this cycle is the S&P 500 index price, a controversial entry in my view, has been outperforming and thus pushing this entire index higher than natural. The S&P 500 notably just made a fresh new ATH, yet this composite index has declined 21 consecutive months. That’s highly concerning. That means the others are doing so poorly it’s making up for the irrationally bullish S&P 500 price action.
I suppose “it could be different this time”, but 21 consecutive months is no accident, or outlier data point. I feel that’s a crystal clear pattern suggesting historically reliable leading economic indicators are on a consistent downward trajectory, headed into an inevitable recession. Admittedly that’s the outcome I see, but ultimately time will tell.