Leading Indicators Point to Higher U.S. Stocks: Chart of the Day

Anyone expecting U.S. stocks to sustain their bull market has the index of leading economic indicators on their side, according to Dan Greenhaus, chief global strategist at BTIG LLC.

The CHART OF THE DAY compares the performance of the Conference Board Leading Economic Index with the Standard & Poor’s 500 Index during the past 20 years, as Greenhaus did yesterday in a note to clients.

The economic barometer rose 0.7 percent in September to 97.1, the New York-based Conference Board said yesterday. The gain surpassed economists’ median estimate of 0.6 percent in a Bloomberg survey, and the latest reading was the highest since April 2008. The index has fallen only once since September 2012.

“Those calling for a ‘top’ in equities are likely to be thwarted a bit longer,” Greenhaus wrote, based on September’s results. Although the leading index is partly based on the S&P 500, which soared 162 percent from its March 2009 low through yesterday, the New York-based strategist wrote that the gauge “has been a helpful indicator of stock price performance.”

The record for the economic index was set in March 2006, and the S&P 500 concluded a five-year bull market the following year. The previous peak was recorded in April 2000, weeks after the end of a multiyear surge paced by Internet-related stocks. Both highs are circled in the chart.

Along with the S&P 500, interest rates, jobless claims, consumer confidence and manufacturing orders are among the 10 components of the Conference Board’s barometer. The index was set to 100 in 2004.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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