Within my latest piece discussing the merits of deflation, I briefly touched on how several leading economic indicators appear to be signally growth may have peaked for the time being. Whilst these business cycle and growth metrics are not necessarily useful on their own, when the price action of equities appear to be confirming the macro message; it may be time to pay attention. Such at time appears imminent.
Looking at two of my preferred leading macro indicators of the business cycle, the ERCI weekly leading index and global credit impulse, both are signaling peak growth may be in the rear view mirror.
Confirming this message are the most economically sensitive sectors of the stock market. Retail, transports, metals/mining, materials and the industrials sectors have all underperformed these last few months relative to the S&P 500. When the markets goes on the make a new high and all economically sensitive sectors such as these do not confirm the new high, it is a clear signal the new highs are not being supported by economic fundamentals.