Markets with Megan

In today's episode of Markets with Megan, Chief Investment Officer Megan Horneman discusses the leading economic indicator index, revealing a concerning 19-month consecutive decline. She talks about components such as manufacturing orders and consumer confidence declining. Megan also focuses on the historical rarity of this extended downturn without triggering a recession. She believes the first half of 2024 will be challenging, suggesting an unavoidable recession may be necessary to curb inflation.

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're coming to you today with our regular segments of Markets with Megan, and we're going to talk about some of the economic data that we received this morning, specifically the leading economic indicator index. And, just so you know, this basically takes about 10 different areas of the economy, everything from jobless claims to new manufacturing orders, to the interest rate spread, to consumer confidence, looks it all together and comes up with an aggregate this index. What we saw in the month of October was that this index is now falling for 19 consecutive months. The weakness that we had in October six of the 10 of these different components declined. Consumer confidence and manufacturing new orders were the weakest on a month-over-month basis and we've seen that in the economic data and come to you with other reports on consumer confidence. Also, if you look just building permits, they did have a small boost, but most of these indicators were basically flat for the month.

So what is this telling us? Unfortunately, going back in history, there's never been a time where this index, which is supposed to be a leading indicator for the economy, has fallen this many consecutive months in a row, and it has not coincided or led to a recession. So it kind of sticks to our case that the economy is still in for a difficult time in the first half of 2024. We think of recessions, probably unavoidable a recession at some degree. We need to have that to get some of the inflation under control. We'll keep watching these indicators as well. A big part of this is obviously the consumer, because that is the biggest part of our GDP and that was weak in this reading. So we'll be back with additional information this week. If you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.