US economy and stock market analysis: Chart of the week

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Leading indicators turn negative

The Index of Leading Indicators is a composite of multiple economic reports for things like employment, consumer spending, and manufacturing orders. The indicator went negative back in July—but just barely. The latest report for August fell further into negative territory, marking the first time there were multiple negative readings since right before the pandemic. Of course, this doesn’t necessarily indicate a recession is forthcoming. It did go negative well in advance of the financial crisis as well as before the COVID-induced recession, but a recession didn’t follow the brief dip into negative territory in 2016. With that said, many investors that watch this index think it's a cautionary signal.

Source: FactSet, as of September 26, 2022.

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