Correlation between the ISM manufacturing and the S&P 500 year on year return

Recently I came across a few analysis looking at the correlation between the ISM Manufacturing number and the S&P 500 year on year return. Which makes sense as the stock market is impacted by the economy. Talking about stating the obvious…

It is not great, but there are a few points to be made:

– Both series look coincident and major peaks and bottoms happen around the same time.

– The highest S&P returns come from periods of accelerating manufacturing activity (and economy).

– Finally, an contracting ISM Manufacturing number is not always associated with a negative YoY returns for the S&P. You have to have a number below 45 for that.