Broker Check

The Weekly Update for 6/29/2023

| June 29, 2023

A Game of Chicken!

The Conference Board is the creator of the Leading Economic Index (LEI), which is Sign #3 in our monthly update, The Seven Signs of a Changing Economy™.  In May 2023 the LEI reported the 14th straight month of consolidation.  This is the third longest streak of monthly declines and just the fourth streak lasting over a year since inception of the LEI in 1959.

Of those three periods, the economy was already in a recession by the time the streak reached its 12th month.  As I noted in last month’s Seven Signs update, the recession the LEI is calling for is either right around the corner, or perhaps, the LEI is making itself irrelevant.

What we do know, per J.P. Morgan Guide to the Markets, 3/31/2023, is that people spending money to consume products represents almost 68% of our entire U.S. economy and is measured as Personal Consumption Expenditures (PCE), our Sign #1 of the Seven Signs.

This is a graph from the Bureau of Economic Analysis (BEA) reporting the inflation adjusted consumer spending (PCE) since 2005.  Observe that as of April 2023, the PCE rests at an all-time high.

With PCE at an all-time high it would be reasonable to ask how the LEI above, in rare-air contraction, could be predicting a recession when people’s spending continues to drive our economic expansion, i.e., the opposite of a recession.

It appears to be a game of chicken playing out in the data flow.  One will prove correct, but so far neither has blinked.  If I had to bet, I would pick PCE and continued economic expansion.  But no one knows the future and that is exactly why we will continue to slowly, thoughtfully and intentionally continue to invest the cash portion of our client family’s asset allocation into lower risk, lower volatility investment positions.

I’m interested in your thoughts, comments, and observations.  Feel welcome to call, email, or stop by the office and say Hi.


James O. Lunney, CFP®



Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.