Our Three Key Market and Economic Health Indicators

By LaRue Gibson on March 3, 2026

Modern research and analysis of  the economy and investment markets have provided a plethora of indicators and tools to shed light on what is happening and what might happen in the economy and risk markets. In our efforts to assist our clients in navigating the noise inherent in future event discounting endeavors, we offer three useful indicators that we believe provide simple, quick, and useful insight into the economy and the stock markets.

LRG Wealth Advisors believes that we can interpret the myriad clues to the market’s health and direction using these three key but simple indicators. They do not reveal the entire story, but they serve a useful purpose in helping to navigate the noise. The three indicators are

1. The Relative Performance of the Equal Weighted Consumer   Discretionary  Index  versus  the  Equal  Weighted  Consumer   Staples Index
2. The Yield Spread between Investment Grade and Non-Investment Grade Corporate Debt
3. The trend and momentum of the S&P 500^® Index

The following charts and graphs communicate how equity market participants  view  the  robustness  of  economic  activity  and investors’ appetite for risk; how bond markets view the health of the economy; and how strong the Trend and Momentum in the Standard and Poor’s 500^® Index is.

Please find our thoughts on each indicator for your review. We invite your thoughts, questions, and comments.

How The Consumer Feels

Ascertaining the animal spirits of millions of consumers can help investors position themselves properly in profitable and challenging markets. Finding indicators that peer through headlines to understand how risk markets view the attitudes and health of the

U.S. consumer, still 70% of economic activity, provides invaluable information to investors. We have found in our three and half plus decades in this business that the relative performance of the Equal Weighted Consumer Discretionary Index to the Equal Weighted Consumer Staples Index not only measures economic growth and the health of the consumer, but also stock investors’ risk appetite. When discretionary stocks outperform, the consumer feels ebullient about the economy and their own prospects. When staples stock outperform, it may indicate that consumers feel uncertain about the economic landscape and their financial outlook. Below we offer the latest assessment of the economy, the consumer, and the markets from an impartial and unbiased economist, the markets.

Seasonality May Matter

We note the deterioration of Consumer Discretionary Stocks relative to Consumer Staples Stocks. We consider as much data as possible to inform are thinking. Does the deterioration of the indicator we consider the impartial and unbiased economist  imply a seasonal pattern at play or something more sinister that is emerging?

What Bond Investors Think

When it comes to financial analysis, the bond market reigns supreme as the champion in sniffing out problems brewing below the surface. We utilize the yield spread [or differential] between High Yield Corporate Bonds and Investment Grade Corporate Bonds. A narrow or narrowing differential indicates a strong or improving economy as the markets have not demanded higher compensation to venture into more economical at risk securities. A wide or widening spread may signal economic stress requiring greater compensation in order to take on greater risk.

Market Trend and Momentum

The  measurement  of  trend  and  momentum  determines  a benchmark stock index’s breadth. Indexes can rise even if only a few large companies perform well. Market breadth measures the true health of  a stock index and the market. To judge market health beyond headlines, we monitor how many index member companies  trade  above  key  moving  averages.  When  most constituents (>50%) trade above a long-term moving average, we consider  the  market  trend  positive.  When  most  constituents (>50%) trade above an intermediate-term moving average , we know momentum is strong. When market benchmark indexes demonstrate both trend and momentum, history indicates that the market  trend  will  continue  with  persistence.  Of  course,  past performance does not guarantee future results, but data indicate a high probability of the market trend continuing. We use the 50-Day moving average and the 250-Day moving average.

The below matrix measures trend on the X-axis and momentum on  the  Y-axis.  The  upper-right  quadrant  reflects  broad  and powerful advances; the lower-left flags periods when rallies narrow or falter. This visual market health matrix allows us to ascertain if market strength is concentrated or truly widespread—and adjust risk positioning with a clear, rules-based context.

Observations and Conclusions

After a brutal Winter in the Northeast, our three powerful yet simple indicators communicate a weakening environment for investors.

1. The Consumer Discretionary/Consumer Staples pair indicates that the economy may enter a difficult period; that the consumer will may reduce their sending on discretionary items, and, thus, risk taking behavior should be reduced.
2. The differential between high yield bonds and investment grade bonds has expanded overt the past several weeks perhaps indicating that the companies most sensitive to economic risk may begin to feel stress in their businesses.
3. However, the U.S. and Foreign Equity Benchmarks Trend and Momentum Matrix shares a story that nearly all benchmark markets are trending up with strong momentum. We note that the technology heavy Nasdaq Composite has deteriorated in momentum and is in a structural downtrend. We will watch this closely to determine if this is an outlier or a forerunner to something more sinister as Spring is sprung

LRG Wealth Advisors thanks you for your confidence and interest. We invite your thoughts, comments, and questions. Take good care.

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