The ISM vs. S&P 500 Index

I am sure many out there are wondering just how bad an Institute for Supply Management (ISM) index of 36.2 is in the historical context and just what it may mean for the stock market.

Rather than a bunch of statistics, I thought the chart below (click to enlarge) might help. It identifies the six previous instances since 1950 in which the ISM index dipped as low as the current level.

Not surprisingly, historical precedent recalls a number of difficult economic periods. What I find particularly interesting is that, consistent with the belief that stocks are a leading indicator, when the ISM bottomed, this was often after stocks had made a substantial move off of their eventual bottom.

Comments

[SivBum:]

Uncle Ben's intention to pruchase Treasury's seem to have cheered up the traders this morning.

2008 Dec 02 10:31 AM