Charts prove the bulls are back

The history of leading economic indicators shows the recovery is well on its way since the market lows.

By InvestorPlace Apr 30, 2010 7:21AM

Bull © Photographers Choice RF/SuperStockPlenty of investors still believe the U.S. economy is still just one shock away from another crash. But a hard look at the data shows that point of view simply doesn't hold water.

Look at the latest bullish housing market data for March -- including stronger permits and sales. Or check out the host of stocks raising dividends now that they're cash-rich once more. The list goes on.

If you're still turning up your nose at talk of the recovery, there's probably little that can be done to change your mind. But if anything will convince even the bearish bear that things aren't so bad, it's a set of charts showing strength in nearly all of the major economic indicators. Take a look:

leading economic indicators chartThis first chart shows the performance of the Conference Board's Leading Economic Indicators composite index. The darker line represents historical data all the way back to 1959 while the lighter line represents our current LEI readings, and the X axis represents time -- showing 12 months before the market bottom, the trough marked as a dotted line and then another 12 months after the low point:

As you can see, the LEI index may have been overly punished during the downturn compared with historical trends, but the economy has bounced back dramatically and is actually tracking a stronger ascent from the bottom than in decades past.
Still not buying it? Well let's tackle the elephant in the room: Unemployment. Despite recent improvements, some people are still focusing on the negative -- namely, the nearly 10% unemployment rate and or the so-called "underemployment" rate that is around 17%. Clearly this is the labor market is the biggest reason of doubt for bearish investors.

So check out the labor component of the leading economic indicators as a separate chart. Remember, the lighter line is our current trend and the darker line is historical trends for 12 months before and after the market "trough" that is represented by the dotted line.

labor unemployment chart

Labor's not looking so bad anymore, is it?

It's worth noting that the Leading Economic Indicators are not raw numbers. For instance, just because the labor sentiment is improving at a faster rate than historical LEI trends does not mean that actually jobless numbers are improving at the same rate. In this case, the indicators are more of a measure of psychology than true economic improvements.

But don't discount the power of improving sentiment. As consumers feel better about spending and about job hunting and as businesses feel better about their economic outlook, more money will be pumped into the marketplace and the recovery will gain momentum.

These are just two charts that show the power of the recovery. Get a complete look at data proving  the recovery with 6 charts that prove the bull market is back here.

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