Readers of this blog know I have been an advocate of the ISM PMI as a very strong component of leading indicators for economic growth and corporate earnings health. Today’s drop to 49.1% indicates a contraction in manufacturing growth (first such sign in the past 35 months!) and is a warning sign that needs to be considered within a full context of other factors.
Long-term strategic allocations to equities with a low volatility profile and fixed income with some duration exposure should outperform core positions in this environment. Higher quality investment grade corporate bonds, likewise, could provide ballast to core equities.