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


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?



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