Definition and Importance of Leading Economic Indicators

Leading Economic Indicators (LEI) 

• The index of Leading Economic Indicators is a composite index of ten economic indicators that typically lead overall economic activity.
• It is released month by The Conference Board
• The 10 components of the LEI are:
  • Vendor performance
  • Stocks
  • Money Supply
  • Interest Rate Spread
  • Consumer Expectations
  • Average workweek
  • Unemployment Claims
  • New Orders Consumer
  • New Orders Capital Goods
  • Building Permits
• By tracking economic data such as the LEI, investors get a feeling for what the backdrop is for their investments and the various markets.  When investors see healthy economic growth, they believe that the stock market is likely to respond favorably because it typically translates into higher corporate profits.  Bond investors, however, prefer less rapid growth because the bond markets are extremely sensitive to whether the economy is growing too fast and causing potential inflationary pressures.

Here is where the trend has been:

If you have any questions or want ideas on how to align your portfolio with current economic trends, ask your financial advisor or give us an email at mfalvey@richinvest.com.

Be well,

Matt