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By HaleStewart October 15, 2014 11:35 am
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US Economy Is In Decent Shape

     While the recent equity market sell-off has gotten a lot of headlines, the underlying US economic condition -- which provides the fundamental backdrop for US equity performance -- has been ignored.  To rectify that situation, let's take a look at the leading and coincident economic indicators, starting with the leading:

 

The table above is from the latest Conference Board US press release with the negative contributions to the LEIs circled in red.  In the last six months, the worst LEI month was April when the positive and negative contributions were evenly split.  However, since then the majority of components were positive.  As a result, the LEIs have been increasing:

     As the leading indicators have been performing at a strong rate, we should expect the coincident indicators to be performing strongly as well.

The above graph is from the FRED data system at the St. Louis Reserve and it plots the 10 year history of the four coincident indicators used by the Conference Board, with all four at a base 100 level for comparison purposes.  All four are in clear uptrends with no sign of contraction on the horizon.

     In saying the US economy is in "decent shape" I am not saying it is without problems.  Like most advanced economies, the employment situation could use improvement, and the lack of meaningful wage growth could crimp the expansion going forward.  But, the leading and coincident indicators say that for the next 6-9 months we can expect slow but steady growth.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer

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