Of course, John Lennon was not referring to the index from the Institute for Supply Management (ISM) when he penned that lyric in Give Peace a Chance, but if he was, his dismissive sentiment of the world’s “isms” would be inappropriate for investors today. We are believers in the power of one ISM in particular to define the outlook for earnings and the economy.
The Institute for Supply Management is an association of purchasing and supply management professionals. The ISM surveys its members each month and publishes the results in the form of an index. Purchasing Managers are at the front of the line when it comes to activity in manufacturing, because orders for the supplies to produce products at manufacturing companies are a leading indicator of increased manufacturing. (As trimmed orders are indicative of a slowdown when demand pulls back.)
