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In case you haven't noticed, the green flag has been waving for optimistic investors for more than a year. Since the start of 2023, the ageless Dow Jones Industrial Average(DJINDICES: ^DJI), benchmark S&P 500(SNPINDEX: ^GSPC), and growth stock-fueled Nasdaq Composite(NASDAQINDEX: ^IXIC) have respectively gained 18%, 35%, and 56%, as well as pushed to record-closing highs. There's no denying that a bull market is in full swing.

But unlike bull markets of the past, the current one may not be here for much longer. That's the message being given to Wall Street from one historically flawless economic forecasting tool.

This recession-forecasting tool has never been wrong

To preface this discussion, there is no such thing as a "guarantee" when it comes to predictive indicators and forecasting tools. If there was one, you can rest assured that every professional and retail investor would be relying on it by now.

There are, however, a very small group of indicators that have an uncanny history of strongly (or perfectly) correlating with moves higher or lower in the stock market. The Conference Board Leading Economic Index (LEI) is one such forecasting tool that, through 65 years of history, has an immaculate track record.

The LEI is a 10-component index that's reported monthly -- usually during the third week of the month. Three of its inputs are financial in nature, and include its proprietary Leading Credit Index as well as the returns of the S&P 500 index. The remaining seven inputs are nonfinancial and consist of average weekly initial unemployment claims, the ISM Manufacturing Index of New Orders, and average consumer expectations for business conditions, to name a few.

The goal for the LEI is simple. It's a "predictive variable that anticipates turning points in the business cycle by around seven months," according to the Conference Board.


After one positive month, US Conference Board leading economic indicators have turned negative once again





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