These unusual indicators may be worth monitoring
Not only stock and bond markets can signify an economic downturn, but also other financial instruments.
There are many other economic indicators worth watching, including the men’s hemline index and the underwear index.
Recently, fears about a recession were on the rise. Investors worry that the record-breaking inflation during the Russia-Ukraine War, combined with plans by the Federal Reserve to raise interest rates aggressively, will slow down economic growth.
Through what is called a yield curve Inversion (which has traditionally occurred before the recessions), this deepening unease can be seen in the U.S. Government Bond Market. Short-dated Treasurys have been replaced by longer-dated debt. This has caused 2-year yields on government bonds to surpass the 10-year rates.
Economists stress that an inversion of bond yields does not guarantee a recession. This indicator may be visible up to two years prior to an economic downturn.
Other economic data can also act as indicators of recession, such as consumer spending and employment figures. Other indicators of economic health have been used by market watchers.
Andrew Lawrence, a British economist developed the so-called skyscraper index in 1999. It measures the relationship between the construction of world-famous buildings and the onset an economic crisis.
Lawrence spoke in 2012. interviewHe shared his findings with the Council on Tall Buildings & Urban Habitat, a non-profit organization.
This includes the New York completions of Empire State and Chrysler buildings during the Great Depression.
Lawrence said that skyscrapers often “capitalize on what was a large building boom.” He pointed out, however that the problem is not with the building but the cluster of skyscrapers.
Kuala Lumpa is the most recent skyscraper completion. Merdeka 118 tower wasThe building was built at the beginning of 2021. It is also the 2nd-tallest in the world. New York’s Steinway TowerThe newest skyscraper, reportedly the skinniest in the Western Hemisphere and the highest in height, is also being completed.
Alan Greenspan used to be the Federal Reserve Chairman. He remembers it being sales of men’s underpants.
Robert Krulwich is a NPR reporter said back in 2008, amid the global financial crisis, that Greenspan had explained to him that because underpants were one of the last pieces of clothing men look to buy, it acts as a good indicator of when times are hard.
Greenspan had stated that underpants sales for men tend to remain consistent. But dips indicate that men feel so financially stretched that they are reluctant to purchase replacements.
George Taylor, Wharton Business School economist, wrote the thesis that led to the “hemline index”. According to the theory, skirts shrink when there are more markets and grow longer during downturns.
This theory is supported by the economic excess of 1920s and appearance of flapper skirts that were knee-length in height, as well as the rise of mini skirts during a period of stronger financial conditions.
But, it has been questioned often about its credibility.
studyThe Erasmus School of Economics Econometric institute published monthly data from hemlines in 2010. It was published by them in 2010.
According to the report, “The major finding was that the urban legend is true” with a time delay of approximately three years.
After the economic recession of 2001, Estee Lauder Chairman Leonard Lauder created the “lipstick Index”. His suggestion was that women spend less on small luxury items, such as lipsticks, to give them a boost when things are tough.
The Covid-19 pandemic that hit 2020 didn’t support this hypothesis. sales of makeup declinedConsumers were forced to stay at home when locked down.
Russ Mould from AJ Bell’s investment research department told CNBC by telephone that, while it is not a good idea to rely implicitly on soft economic indicators, they are “always worth watching.”
Mould stated that it is when the price of luxury items such as art and champagne “goes through the roof” while the share prices, buybacks and mergers and acquisitions (and debt) are rising, investors need to start feeling a little more worried.
“It’s a sort of bull market, happy-days-are-gonna-last-forever-type behavior that just can’t last forever, because it never does,” he said.