The iShares 20+ Year Treasury ETF (TLT) rose as Treasury yields fell, signaling economic concerns for the second half of 2025. The Leading Economic Index (LEI) dropped 0.3% in June, down 2.8% in the first half of the year, hinting at a weakening economy.

Despite a stock rally, underlying economic stress persists. The LEI’s decline reflects low consumer expectations, weak manufacturing orders, and rising jobless claims, overshadowing the stock market’s optimistic outlook.

With the return of tariffs on Aug. 1 looming, potential higher import prices could dampen consumer spending, impacting the economy. Bond markets anticipate slower growth, contrasting with equities’ stability amidst trade uncertainty.

The LEI serves as a key recession indicator, showing signs of economic slowdowns ahead. The historical track record of the LEI declining before recessions underscores investor concerns about market strength and future growth.

While not infallible, the LEI combines various economic indicators to provide a comprehensive signal of economic health. It serves as an early warning system for investors, businesses, and policymakers, offering insights into potential turning points in the business cycle.

The LEI’s historical reliability during economic downturns highlights market risk over the next six to 12 months. Market participants should use the LEI in conjunction with other indicators to make informed decisions about their portfolios and assets.

As markets hit record highs, economic indicators like the LEI suggest caution. Keeping portfolios diversified and adaptable could be crucial in navigating potential market fluctuations in the coming months.

Read more at Yahoo Finance: TLT Surges on Weaker Leading Economic Indicators Data