Gavekal Capital: Durable Goods Orders: The Disconnect Continues

Wednesday, March 26, 2014

Durable Goods Orders: The Disconnect Continues

This morning durable goods orders were released, and while the headline index exhibited a good bounce from January, the rest of the report was more mixed.  We identified durable goods orders as an economic indicators we are watching closely for 2007 parallels.  So far, we don't see much to validate the idea that the US economy is breaking out into some new, stronger growth phase.

In the charts below, we compare durable goods orders--both total and total ex-transportation--to the S&P 500.  In order to justify stocks having broken out above 2007 levels, we would like to see some economic validation.  We don't see it in today's report.  Both total and total ex-trasnsport durable goods orders are only 1% higher than the end of 2011.  The S&P 500, meanwhile is up over 550 points from the end of 2011.  The disconnect between stock prices and economic activity continues.