The Pring Turner Leading Economic Indicator (LEI) comprises a weighted ROC for three key economic sectors and a financial one. These are construction, consumer spending, employment and the stock market. It has led every recession since its inception in the 1950’s. To be fair, it also signaled the non-recession of 1966. Signals are triggered by the “Recession Caller” in the lower window dropping below the red trigger line. The latest data point to the indicator moving away from that line in the direction of renewed recovery and away from a business contraction.

Source: Pring Research

The most severe stock market declines (-20% or more) have occurred during economic recessions. For retirees, it is especially critical to avoid recession-driven market declines in order to effectively secure a stable retirement lifestyle. Recovering from these big losses can be a difficult and highly stressful endeavor.  This is one reason why we follow the natural rhythm of business cycle swings closely and stay on alert for major turning points in the economy.

What is the Pring Turner LEI telling us now? The following chart shows the most recent 20-year history of this forward-looking indicator, and how it peaked out and began a persistent decline a year or more before the last two recessions. This behavior is in contrast with today’s positive trend where the indicator just reached an all-time high! The latest reading suggests that there is low risk of a recession in the coming months. Continued economic strength typically translates into higher stock prices.

Photo by Samuel Zeller on Unsplash

Disclaimer: Pring Turner is a Financial Advisor headquartered in Walnut Creek CA, and is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The views represented herein are Pring Turner’s own and all information is obtained from sources believed to be accurate and reliable. This information should not be considered a solicitation or offer to provide any service in any jurisdiction where it would be unlawful to do so. All indices are unmanaged and are not available for direct investment. Past performance does not guarantee future results.

Martin Pring
Martin Pring
Martin J. Pring has written more than 20 books on investing such as asset allocation, market psychology and investing around the business cycle. His widely popular book, “Technical Analysis Explained”, has been translated into 8 languages and for several decades was required reading for the Chartered Market Technician’s (CMT) designation. Martin, in collaboration with Dow Jones Indexes, co-developed the Dow Jones Pring U.S. Business Cycle Index in 2012, a unique index based on the financial advisory firm’s “Six-Stage” business cycle investment strategy. Martin is an investment strategist & principal of Pring Turner Investment Management, Walnut Creek, CA.

Connect with Martin.

Continue Reading

Articles filed under Martin Pring's Technical Corner

The May Employment Report was a Blowout but What’s Next?

June 9, 2020 - Where Have We Been? Back in February the stock market registered new highs. At the same time, several of the leading indicators we follow were tentatively signaling the emergence of the economy from its third growth slowdown since the financial... Continue Reading

Economy Drops at an Unprecedented Rate but Could be Close to an Upside Reversal

May 7, 2020 - Chart 1 below compares the S&P to our Master Economic Indicator (MEI). It combines the momentum of six leading economic indicators and comes into its own when economic activity causes it to drop below the -40% level and then moves... Continue Reading

Our Business Cycle Work is Close to signaling a Stage III. Guess Which Market That’s Bullish for?

January 6, 2020 - A large part of the Pring Turner investment approach is derived from the fact that the business cycle is nothing more or less than a repetitive chronological sequence of events. The cycle begins with a bottoming in the interest sensitive... Continue Reading

Recession Watch Update: Four Leading Economic Indicators Signal a Stronger Economy Ahead

October 17, 2019 - Even though we have already experienced the longest expansion on record, the latest data suggest the possibility of a resurging level of business activity as the economy emerges from its third post 2009 slowdown. As a follow-up to our July... Continue Reading

Our LEI Hits a New High

October 2, 2019 - The Pring Turner Leading Economic Indicator (LEI) comprises a weighted ROC for three key economic sectors and a financial one. These are construction, consumer spending, employment and the stock market. It has led every recession since its inception in the... Continue Reading