Weekly Charts
As the economy enters the late stages of reopening, we are going to see growth rates return to lower, more normalized levels. It’s likely many investors will misinterpret this to be a full-on contraction.
One measure to watch will be the Leading Economic Indicator (LEI, Figure 1). Historically speaking the LEI has been one of the most accurate and widely followed indicators used to predict economic recessions. Although a drawback is its potential to give false signals during periods when growth tapers and the LEI seems to break negative but does not. To mitigate this, we’ll be tracking the LEI in close conjunction with state-level coincidence indicators. For example, in both 2012 and 2016 we saw the LEI nearly break into contraction territory, but the trends were not supported at the state level, where only two to three states were reporting a sustained contraction. To confirm a possible systemic economic contraction, we would want to see LEI contract in line with an increasing number of states reporting a deterioration in their coincidence indicators.
As these indicators taper, so will asset prices. But as long as we don’t see signs of a broader economic contraction in the data, it will likely prove to be a good buying opportunity for equity investors.
I want to receive Mirador’s research and market updates!
Information presented reflects the personal opinions, viewpoints and analyses of the employees of Mirador Capital Partners, LP, an SEC-registered Investment Adviser. The views reflected in the commentary are subject to change at any time without notice. Nothing herein constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Mirador Capital Partners, LP manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Visit us at miradorcp.com for more information.