Taps Coogan – January 23rd, 2022

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The following chart, from Daniel Lacalle, shows the relationship between the US manufacturing PMI and the S&P 500.

The relationship isn’t perfect (see 2019), but a return to ‘normal’ levels for the manufacturing PMI would imply markets far south of here.

That being said, there isn’t a precedent for PMIs slowing this much and still being expansionary (over 50). After some more pain, the market will sniff the Fed’s inevitable pivot and some of the growth sectors that are already down 50%+, and may fall further, will look bottomed.

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