After all, the S&P/TSX composite index is still down 40% from its all-time high and virtually flat so far in 2009.Since equities typically rebound months before the economy does, what investors are really looking for is an indicator that precedes this turnaround.UBS strategist George Vasic thinks he may have identified this signal and the future looks somewhat brighter.
It turns out to be a psychological measure he labels the expectations gap, which is considered so bearish, it’s bullish. Specifically, it lies just below the surface of the widely scrutinized consumer confidence survey, and is measured by taking the expectations component and subtracting the assessment of current conditions, Mr.
The good news is that this condition appears to be unfolding. Historical data shows that the expectations gap turns upward in the early part of recession as sentiment about present conditions falls faster than expectations.
The stabilization of expectations, which appears to have occurred in the past three months, acts as the next leg of support.Mr.
Source: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2009/02/08/237504.aspx
