Costco – The Stock Is Sending A Warning Message

The lower panel shows our business cycle indicator updated in each issue of The Peter Dag Portfolio Strategy and Management available at

The interesting feature of the chart is the bottoms of the spread coincides with a peak of the business cycle. A peak of the spreads takes place when the business cycle bottoms.

The message is, and this should not be a surprise to the readers of the article published here, COST outperforms the market when the economy slows down.

Key takeaways

The transition of the business cycle from Phase 2 to Phase 3 signals the need to rebalance the investment portfolio.

The sharp increase in inflation, interest rates, and commodities we have been experiencing suggests we are close to the Phase 2-Phase 3 turning point of the business cycle.

The ratio COST/SPY has reached oversold conditions, coinciding in the past with a peak of the business cycle. These oversold conditions suggest Costco will continue to outperform the market.

The strength of Costco compared to the market may suggest investors are beginning to position their portfolios for the Phase 2-Phase 3 turning point of the business cycle.

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