ISM numbers today slid below 50 indciating manufacturing is contracting for the first time in 3 years. If this contraction is confirmed in next data point as well then I would admit my recession call for late 2007 may have been a bit off because I didn’t expect this number to go below 50. We may hit something ugly 1H 2007. I am a firm believer in the ISM numbers because strong manufacturing provides jobs which fuels consumer spending.
Maybe this is an outlier and if we get the same below 50 number next time, we are definitely in troubled waters. To be clear, since 1960, such contraction in manufacturing activity has always led to a recession. I locked some of my 2006 gains today. The market seems to think the same as SP500 is testing 1400, Naz is testing 2400.
