The Economic Leading Statistics® index (ELS) is a proprietary index produced by Saratoga Capital Management, LLC (Saratoga). The purpose of the index is to signal, generally speaking, whether the US economy is expanding or contracting. As its name suggests, ELS is intended to lead other measures of economic expansion/contraction, and has historically provided a reliable indication of where US Gross Domestic Product (GDP) is headed in the months ahead. While ELS might tell us whether an expansion or contraction is headed our way, it generally doesn’t tell us the strength of that movement; we have other indicators for that. ELS is comprised of ten underlying metrics, including Housing Starts, Retail Sales, Industrial Production, Saratoga’s own Consumption Modification Index® (CMI), readings from a number of United States’ debt instruments, and monetary policy figures. Index readings begin in January 1960. Saratoga uses ELS in a number of ways, however it is often most helpful in establishing a confidence level in GDP data using the index’s three month average against GDP. The normal range for ELS’ three month average is -30 to +30. When we refer to ELS readings below, we will be referring to this three month average.

When combined with Saratoga’s additional proprietary indices, such as our Economic Strength Monitor™ and our Consumption Modification Index®, ELS may help us to understand if the economy is expanding or contracting, if current economic trends will continue, and what the nature of the economy may mean for various investment strategies or sectors.