On Monday, the Conference Board’s U.S. Leading Economic Index (LEI) was released, and it was higher for the third straight month: +0.7 in June, +1.3 in May, and +1.0 in April. The index is comprised of 10 different indicators (see chart below), of which 7 rose during June. The biggest gainers were the yield curve, building permits, stocks prices, initial jobless claims, and average weekly manufacturing hours. Surprisingly, real money supply, the single biggest component within the index, contributed negatively for the month.
At Pinnacle we watch numerous barometers of domestic and global growth, such as: several leading economic indicators (including the Conference Board’s U.S. Leading Index, ECRI’s Weekly Leading Index, OECD’s U.S. and global leading indicators, etc.), a host of market-based data (economically sensitive commodity prices, shipping rates, etc.) and conventional economic reports. The combined message from all of these measures recently is pointing towards a resumption of economic growth in our near future.
We are currently positioned at neutral volatility within our portfolio construction since we believe that the world economy has undergone some structural changes that will likely create long-term headwinds and put a lower ceiling on future growth. But we are encouraged that signs are appearing that cyclically the worst may be behind us, and if the recent improvement in leading indicators is painting an accurate picture, the resumption of economic growth may come sooner than the consensus currently thinks…
