Durables Goods Orders: A Leading Indicator for Stock Prices?

Monday, October 01, 2007 | 02:00 PM

Interesting chart from Mike Panzner regarding durable goods and the SPX. Note that Real spending on nondurable goods was flat in August.

>

Durablegoodsstocks_2

>


Before getting overly excited about this, I would want more info on three distinct questions: 

1) Does the correlation go back beyond 1998? Is this merely a recent phenomena, or does it have a deep and broad history?

2) A fall off in Durable Goods would make sense as an indicator of both concurrent and future economic slowing, profit cooling, and equity price retracement. However, is this merely a decade of coincidental correlation, or is there a true causative factor at work?

3) There seems to be a year lag from September 2001 to 2002, from when Durable Goods orders picked up to when the market started moving higher. Is this historically typical? Has the same lag occurred in the past with Durable Goods falling (as they have since September 2006)?

It does seem to be an intriguing parallel . . .


>

UPDATE October 2, 2007, 5:52am

Several emailers and commenters have directed me to the Dallas Fed's collection of charts, especially this one:

0705c1


Here's another view: The long term relationship between Durable Goods ex-Transportation and the broader stock market has been ambiguous.

Spx_durable

Significant divergences between the two can be observed in 1984, 1989, 1995 and 1997 for example.

Monday, October 01, 2007 | 02:00 PM | Permalink | Comments (53) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00e54eee02088833

Listed below are links to weblogs that reference Durables Goods Orders: A Leading Indicator for Stock Prices?:

Comments

Hello Mr. Ritholtz,

Very good questions regarding the figure. I am running into charts like this more frequently and often wonder the same things. How is it possible to compare the current state of affairs with the top of a market bubble that this country hasn't seen since the 1920's? Are we likely to see such a severe bear market in the near future? Probably not, but I guess it depends on who you ask.

Paul

Posted by: Paul Stiles | Oct 1, 2007 2:20:31 PM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner