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In a recent note, BofA’s Neil Dutta writes that there’s More to life than the ISM manufacturing index.
What prompted this philosophical statement? According to Dutta, clients are concerned about the ISM rolling over, and what that means to the market.
He notes that there’s a “cottage industry” of market timing models based on the ISM, but that ultimately they’re all hogwash, and what’s more, it’s not even a great economic predictor.
As he notes, there have been two recessions since the early 90s, yet numerous peaks and sub-50 readings in the ISM during that time.
There’s another interesting thing about the ISM, which we hadn’t previously realised.
The survey asks 350 purchasing managers various questions, including whether hiring is up or down. The often have no idea, since they’re not in HR. It’s just their best guess. Thus the payrolls report is a way better report (although unfortunately that hasn’t been looking so hot, either.
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