The Conference Board’s Leading Economic Index (LEI) is one of our favorite economic indicators. It is designed to predict future movements in the economy based on a composite of 10 economic indicators (like manufacturers’ new orders, stock prices, and weekly unemployment claims) whose changes tend to precede shifts in the overall economy. Last week, the LEI expanded for the first time in five months, along the way tying the all-time high set September 2018. Additionally, it is up 3% year over year (YoY).

The combination of continued weak economic data around the globe and various parts of the yield curve inverting are leading many to surmise that a recession is likely imminent. The good news is that the LEI has not turned negative on a YoY basis, which it has done prior to every recession since the 1970s. And even when it has turned negative, it was another eight months on average before a recession officially occurred (with a median of six months lag time). For this reason, and because of its solid track record of predicting recessions, the LEI is a component of LPL Research’s Five Forecasters.

As our LPL Chart of the Day shows, the LEI remains well above the 0% YoY threshold, which would be a definite negative—on multiple levels.

Powerful sign the Economy is on the Firm Footing

“The reality is that many of the coincident economic indicators (like consumer spending, capital expenditures, and industrial production) have painted a very dour outlook,” explained LPL Senior Market Strategist Ryan Detrick. “Now the good news is that the more leading economic indicators like copper, money supply, and services have all shown marked improvement since the December lows.”

For more on our thoughts on the economy, be sure to read our latest Weekly Economic Commentary.


IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

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.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Member FINRA/SIPC