Gavekal Capital: Danish Alert

Wednesday, February 19, 2014

Danish Alert

Over the years, we have assembled a variety of indicators that help us understand movements in stock prices.  One of the more unusual indicators is the relationship between the S&P 500 and Denmark consumer confidence.  In 2000, Danish consumer confidence peaked in June, leading the peak in stock prices by three months.  In 2006, Danish consumer confidence peaked, giving a one year forward signal of the peak in the S&P 500.  In August 2010, once again, Danish consumer confidence peaked one year ahead of the intermediate decline in August-October 2011.  Recently, Danish consumer confidence appears to have peaked once again.  If history is any guide, and if Danish confidence stays down, this indicator represents an early warning flag for 2014 stock performance.