DoubleLine Podcasts

MMM Episode 29: August 16-20 Recapping Markets/Macro and Eyeballing the LEI

After reviewing macro and markets for the week, Jeff Mayberry and Samuel Lau take a close look at the Conference Board’s Leading Economic Index (LEI), a composite of 10 indicators used to anticipate turns in the economic cycle (13:07). The podcast co-hosts assess the LEI’s predictive track record since its inaugural print in January 1996, and they analyze its components. Those constituents have changed over time. The most recent such change was the substitution of the M2 money supply with the Leading Credit Index (20:47).

The week of Aug. 16-20 was a relatively quiet one for U.S. stocks (slightly lower) and bonds (slightly higher). Jeff Mayberry, however, notes energy equities, a persistent frontrunner YTD, were the worst performer on the week (6:23), ceding leadership to real estate and financial stocks. Commodities ended the week mostly in the red (4:22). The week’s $5 decline in West Texas Intermediate crude to $62 a barrel, Samuel Lau observes, reflected reduced travel and mobility, particularly in China, due to the spread of the Delta variant of the COVID-19 virus (4:45).

The Aug. 18 release of the FOMC minutes (9:49), Jeff and Sam noted, raised the possibility, if the broad economic recovery continues, of a commencement of tapering by the Fed of asset purchases later in this year. That compares to market expectations of reduced QE starting in 2022. If the Fed does decide to taper this year, Mayberry notes, Fed Chair Jerome Powell doesn’t have a lot of “runway” to prepare the markets. So perhaps, the cohosts speculate (30:17), Powell will signal how he’s leaning in his next scheduled public appearance: 4 pm Eastern/1 pm Pacific Friday Aug. 27 on the Kansas City Fed’s YouTube channel.

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