Over Index
Many past economic expansions and bull markets have ended with an overheating economy. Borrowing, confidence, and spending typically have been catalysts for growth. However, when these components have risen to excessive levels, they have tended to lead to runaway inflation and unsustainable growth. Because of this, we watch for signs of excess using the Over Index, which tracks trends in borrowing, spending, and consumer and business confidence.
The Over Index held steady in our latest update, and all three drivers remained well short of the excessive levels we’ve seen in prior recessions. In fact, evidence of over-borrowing actually diminished amid a slowdown in commercial loan growth, likely related to trade tensions.
We remain optimistic that the U.S. economy will deliver continued steady, albeit possibly slower, growth in 2020, potentially bolstered by progress on a U.S.-China trade agreement. Leading economic indicators show changes that we are watching carefully, but we continue to believe our next recession will not appear until at least late 2020 or early 2021.
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Ryan Detrick is senior market strategist at LPL Financial.