Consumer Spending Slowdowns and Bear Markets

Thursday, February 09, 2006 | 07:15 AM

Yesterday (via Doug Kass), I noted that the Consumer had grown increasingly levered. Why is this so important? Because of the relationship between Consumer Spending slowdowns and Bear Markets:

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Bear markets begin when growth in real consumer spending (PCE) peaks and begins to slow

click for larger graphic

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Source: Joseph H. Ellis, Ahead of the Curve

Ellis notes: 

The relationship between economic slowdowns (led by downtrends in year-over-year consumer spending) and bear markets (vertical yellow bars) is remarkably consistent, though not infallible, over many cycles. Most bear markets begin (see circles) when the year-over-year rate of growth in consumer spending is peaking, and investor and general business optimism are at their highest! Considerable courage is required to reduce investments at such times.

Thursday, February 09, 2006 | 07:15 AM | Permalink | Comments (8) | TrackBack (0)
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Comments

Isn't this single-variable analysis?

Posted by: Joseph Weisenthal | Feb 9, 2006 10:37:02 AM

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