How Does 2014 Compare To 1987 And 2007?
ISM Provides A Reference Point
In 2007 and 2008, the average reading of the Institute for Supply Management’s (ISM) manufacturing purchasing managers index (PMI) was 48.4; the median reading was 49.9. A PMI reading above 50 indicates that the manufacturing economy is generally expanding; below 50 it is generally contracting. How does ISM’s PMI look today? Monday’s reading came in at 58.7 or much better than 2007-2008.
How Does The Bigger Picture Compare?
This week’s stock market video compares 1987 and 2007 to the present day, allowing us to better understand the odds of a serious and rapid decline in equity prices.
After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.
Investment Implications – The Weight Of The Evidence
Since the hard evidence (technicals and fundamentals) remain favorable, we made no changes to our allocation mix of equities (NYSEARCA:SPY) and bonds (NYSEARCA:TLT) Monday. Should weakness continue, the S&P 500 has possible support near 2040, 2020, and 2011.
Buyers may surface in technology if the NASDAQ (NASDAQ:QQQ) falls back between 4566 and 4610.
If the facts call for a reduction in risk later this week, we will not hesitate to take action. For now, on our time frame, the last two days fall under the “normal volatility” category.