Part 6/8:
The discussion also touched upon the nuances of economic indicators, specifically the LEI vs. the coincident economic index. While the LEI serves as a predictor of economic shifts, the coincident index provides a snapshot of the current economic situation. Allen clarified that though the LEI is frequently referenced, it does not entirely reflect the complexities of the economy, leading to potential misinterpretations.
Interestingly, data links a recession with the LEI's performance. Historically, whenever the LEI has rolled over and crossed into negative territory, a recession has followed closely behind. Presently, the LEI has shown signals indicative of a downturn, raising alarm bells over the continued rise in stock prices despite underlying economic stresses.