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Leading indicators continue to look very bullish

As I said in a previous post, I don't usually put much stock in the Leading Economic Indicators published by the Conference Board. But the pronounced rebound in this statistic, whose growth rate is shown in the above chart, is so strong that it is probably risky to ignore it. Mark Perry has some amplifying comments here. I note that the current rebound is the third-strongest on record.

It then occurred to me to put together this next chart, which shows the level of the LEI index on a semi-log scale. I note that the index was roughly flat throughout the 1965-82 period, when equities delivered negative real returns for 17 years. But today the index appears to still be following the significant uptrend which began in late 1982. I don't want to make a big deal of this, but I do think it's worth noting. I've seen a number of people attempting to make the case that the bear market which began in 2001 is going to be a replay of the 1965-82 bear market. While I still worry that inflation will be higher than the market expects in coming years, there is no sign yet that inflation will be anywhere near as bad in coming years as it was in the 1970s.

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