PPI and Market Performance

Another timely and relevant observation from Chart of the Day:   On Tuesday, the producer-price index (PPI) for finished goods in March rose 0.7%. The PPI is now 4.92% higher than it was one year ago and significantly higher than the current 4.20% yield of the 10-year Treasury note.

Chart of the Day reports that while there have been some reports that
are predicting a slow down in global economic growth, today’s chart
illustrates that producer prices continue to rise at an above average
pace and that has tended to correlate with a struggling stock market.

>

click for larger chart
Ppi_20050420

Ppi_20050420b_1

sourceChart of the Day

>

In the 70s, high PPI clearly correlates with weak stock performance.
Same in the early 1990s, although the underperformance in 1990/1991 was
not nearly as awful as the 1970s. 

The PPI rise in 2000, while correlated with a struggling stock
market (to say the least!), was likely not the cause of the subsequent
market collapse.

The question now arises: Is the recent  rise in PPI most analogous to the 1970s, the early 1990s, or 2000?

 


>

Source:
Chart of the Day
http://www.chartoftheday.com/20050420.htm?t

Category: Economy, Markets

The Apprenticed Investor: The Wrong Crowd

Category: Investing, Psychology

Understanding The “Kitchen Sink Economy”

Category: Economy, Markets

Chart of the Week: NYSE Member Firms’ Client Margin

Category: Markets, Trading

Margin Calls and Behavior Shift

Category: Markets, Trading

A Bull Market in Real Estate Agents

Category: Real Estate

Apartment Market Improvement?

Category: Real Estate

Funds Made “Math Mistakes” on Performance Fees

Category: Investing

Economics, and the Clash of Technology and Copyright

Category: Finance, Music, Web/Tech

Invisible Hand

Category: Markets