A high reading for the “Main Street Meter”, a stock market gauge that was developed by institutional investor James Paulsen of the Leuthold Group is indicating that the stock market will go much lower. Readings for the meter are calculated by dividing the consumer confidence reading by the unemployment rate. A high reading indicates that consumers and investors are optimistic. This is certainly the case now due to unemployment being at 3.9% which is the lowest level since 2000. Also, consumer sentiment is now at its highest levels since the 2008/2009 Crash and Great Recession.
The meter is a good measure for the markets. A high reading comprised of low unemployment and a high level of consumer confidence indicates that that everyone has a job and a positive outlook. A low reading indicates that a lot of people are out of work and a pessimistic outlook prevails. When the reading is high reading investors are less fearful and greedy. When the reading is low investors are more fearful and less willing to take risk. Both of the readings coincide with market highs and lows respectively. The meter is a great contrary indicator to predict market peaks and troughs. The chart below compares the S&P 500 with the meters actual and projected readings from 1962 through 2023.