Market Volatility Got You Down? This Indicator Shows Business Strength at 14-Year High!

Amidst all of the nerve-wracking market volatility in recent days, some good therapy may be to refocus on business fundamentals and the state of our economy. Refer to the chart below.




I come across many business and economic indicators in the course of my investment and financial market research, but I find the Goldman Sachs Analyst Index (GSAI) shown above to be one of the most comprehensive.

The indicator encompasses sales and shipments, orders, inventories, output prices, exports, wages and labor costs.

Similar to the more familiar government’s purchasing managers index, a score above 50 signals expansion, while a score below 50 indicates contraction.

As seen, we are at a 14-year high on this indicator, eclipsing the prior peaks in 2011 and 2018.  And we are clearly above the level just prior to the COVID-19 pandemic in February and March of last year.

Core economy

In fact, if you delve into the tabular data that supports the above chart, which I will not bore you with here, important subcategories like “Companies’ sales and shipments” are scoring over 90 and “Raw material prices” are at around 80, both very high scores and well above the critical 50 level.

In my view, this is all reflective of very solid strength for the state of business in the U.S. currently. The question of how much of this is already sufficiently reflected in the financial markets is a different topic for another article.

Suffice it to say, there is core strength in the U.S. economy at the present time.

The economy is alive and well folks. When we go through extreme market gyrations like we have just witnessed in recent days, it often helps to remind ourselves of this important fact.

Onward and upward!

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Gary has more than 30 years of industry experience, which includes research analysis and portfolio management for both retail and institutional accounts. He worked as a Senior Vice President at Wells Fargo Advisors and Wells Fargo Investment Institute for approximately 14 years in total, where he was a senior portfolio manager for both equity and asset allocation portfolios. He was also involved in investment manager due diligence and selection for the firm’s multi-manager portfolio models. Prior to joining Wells Fargo, Gary held senior-level investment management positions with several registered investment advisory organizations. He has been a Chartered Financial Analyst (CFA®) charter-holder since 1989. The CFA is a professional credential earned by investment management professionals after successfully passing three years of rigorous examinations and recording several years as a practising professional within the industry. Gary received his Bachelor of Science in Engineering from Purdue University and his M.B.A. in Finance from The University of Missouri. Additionally, Gary holds his FINRA SIE, Series 7 and Series 66 securities registrations as well as his Missouri Life Accident & Health insurance license. He is a member of the CFA Society of St. Louis and the Financial Executives Networking Group. He resides in Kirkwood, MO with his wife Kathy, and they have three adult age children, Aly, Ryan and Josh.