A leading indicator for U.S stocks

The most powerful leading indicators we have found for U.S stocks over the medium-term horizon are the net percentage of 39 OECD countries with rising leading economic indices (LEI’s) and the net percentage of 39 central banks that are easing rates.

They achieve maximum correlation with the NYSE annual percentage change with 7 and 10 months lead respectively.

If we aggregate these two, we derive a leading indicator for U.S stocks, with a 0.57 r-square to NYSE (pretty darn good as these things go) which at this moment is showing a ongoing massive tailwind for stocks since March 2023, just over a year ago.

You can find these indicators at the bottom of the Global Economic Report that is published each month, as well as in the CRB tab in Monthly charts.

The premise then, is that any dips you see now are supposed to be a buying opportunity.

Its incredible that we have to look at metrics outside the U.S to derive future direction for domestic stock markets. It shows that the U.S markets (and indeed the economy) are not an island.

About RecessionALERT

Dwaine has a Bachelor of Science (BSc Hons) university degree majoring in computer science, math & statistics and is a full-time trader and investor. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT into a company used by hundreds of hedge funds, brokerage firms and financial advisers around the world.
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