ISM New Orders Index
Frequently, there’s money to be made in the stock market in the months following the initial curve inversion. After the inversions of August 2006 and June 2019, the S&P 500 rallied another 23% and 19%, respectively, into its final bull market high. If this cycle plays out in textbook fashion, the business-cycle peak would arrive in September.
While the MTI’s Cyclical category remains hostile at -3, we’ve observed steady improvement in its leading inflation components. Especially notable is the reversal in the NOPE Index (ISM New Orders Minus Price Index).
The economic expansion officially entered its 22nd month in February. In dog years, that translates to an age of 13—the same age the recovery might have reached this July if not for the COVID disruption. The late-cycle characteristics displayed by a recovery that’s statistically so young dissuade us from issuing a high-conviction forecast for 2022.
It’s certain that today’s cyclical bout of inflation will prove “transitory,” if only because the word itself is practically meaningless. Our time on earth will also prove transitory, and so too will the current stock market mania—to the shock of most of the nearly 20 million “investors” on the Robinhood platform.