Leading Economic Index (LEI)
The Conference Board is the creator of The Leading Economic Index (LEI). For almost fifty years they have tracked and reported on their ten key economic inputs with an exceptional record of accuracy.
The LEI is our peek around the economic corner to see what might be happening six to nine months in our economic future. This month the LEI reported in at -.40% and is the fourth consecutive monthly contraction. Thus, Sign #3 has rapidly shifted to solidly negative in the most recent data (July 2022) from “barely positive” in the May 2022 Seven Signs update.
Here is the data flow for 2022 YTD:
There is no hard and fast rule for when the LEI data shows up in the expansion, or contraction, of our economy. Per the Conference Board’s own data, it is “six to nine months”. This would seem to imply that six to nine months from April 2022 we would see the economy contracting.
The data flow tends to fluctuate and that is the reason I don’t label it as a “negative” indicator until we observe three to four months of contraction. Clearly, we have four months of contraction and to my eyes that trend simply confirms the six to nine months starts counting down from April 2022. Thus, the LEI is suggesting a contacting economy starting October 2022 through at least January 2023.
Per Yale Hirsch of The Stock Trader’s Almanac fame, September and October are historically the two worst performing months of the twelve. As I write this update on September 14, 2022, we will continue to be patient with the cash we have raised from higher prices earlier this year. It seems prudent to have cash in our money market accounts as a “shock absorber” since the increasing interest rate environment we are in will be a headwind for most investment categories.
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®
CERTIFIED FINANCIAL PLANNER™ Professional
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal. No strategy assures success or protects against loss.