Issue 1 · Late October 2026
Leading indicators, economic growth by economy, industrial production, business and consumer confidence, and Taiwan’s business cycle signal. Each number compares the indicator only with its own past: the share of past months it is higher than; 50 is normal. For prices and rates, what is compared is how far the reading is from its own 10-year average: 100 means the furthest from that average, not necessarily a record price or rate.
This issue
Combined, the 6 indicators in this category stand at 61 warm.
The others: Philly Fed 75 (warm), GDP growth 62 (warm), Industrial output 61 (warm), Leading index 42 (neutral) and Confidence 22 (cool).
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
Where it stands now
The category combined
Each month we take the median of the indicators’ positions, going back to 1980. Higher = a stronger economy and more confidence.
coldcoolneutralwarmhotHatched = earlier periods that were also warm
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every warm month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
Bars: median cumulative changeEarlier months with Economy and Confidence warm, excluding the current period (105)All months (556)
Median of the deepest drop below the starting month within the next 5 years: −4.1% for months with Economy and Confidence warm; −4.0% for all months.
“US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
1980–2021: average yearly change in US stocks over the next 5 years
In this period, the hotter the month, the lower the average over the next 5 years. The months overlap, so there are really only a few market episodes. This is a tendency, not a rule, and not a forecast.
What it is linked to
Leading indextoCopperCommon explanation: Knock-on · same direction
Expanding manufacturing needs more copper
This issue: Leading index at 42 (neutral), Copper at 91 (hot) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.44 · in step in 40 of 42 5-year periods
Taiwan export orderstoTaiwan cycle signalCommon explanation: Knock-on · same direction
Export orders lead exports and production, and the business cycle signal follows
This issue: Taiwan export orders at 99 (hot), Taiwan cycle signal at 99 (hot) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.65 · in step in 17 of 17 5-year periods
Leading indextoIndustrial outputCommon explanation: Knock-on · same direction
Orders and confidence move first, and production adjusts after
This issue: Leading index at 42 (neutral), Industrial output at 61 (warm) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.66 · in step in 10 of 10 5-year periods
ConfidencetoLeading indexCommon explanation: Knock-on · same direction
Business and consumer confidence surveys pick up turning points in the economy early, moving with the leading index
This issue: Confidence at 22 (cool), Leading index at 42 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.77 · in step in 36 of 36 5-year periods
Philly FedtoIndustrial outputCommon explanation: Knock-on · same direction
The new orders and shipments that manufacturers report lead actual production
This issue: Philly Fed at 75 (warm), Industrial output at 61 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.45 · in step in 10 of 10 5-year periods
Industrial outputtoCopperCommon explanation: Knock-on · same direction
More production uses more metal
This issue: Industrial output at 61 (warm), Copper at 91 (hot) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.31 · in step in 9 of 10 5-year periods
Yield curvetoLeading indexCommon explanation: Cause · same direction
An inverted curve usually signals tight monetary policy and expected rate cuts, and the economy weakens afterwards; inversions have often come before recessions
This issue: Yield curve at 41 (neutral), Leading index at 42 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Weak or inconsistentAgreement +0.22 · in step in 28 of 51 5-year periods
Leading indextoGerman stocksCommon explanation: Knock-on · same direction
Germany relies on export manufacturing and is deeply embedded in global supply chains, so global demand directly affects its exports and investment
This issue: Leading index at 42 (neutral), German stocks at 72 (warm) — at least one is in the neutral range (40–60), so we make no call this issue.
Weak or inconsistentAgreement +0.24 · in step in 34 of 42 5-year periods