This visualisation displays the relationship between ISM Manufacturing PMI and the YOY Change % in 10 YR yield. ISM Manufacturing PMI represents the state of the manufacturing economy. A PMI reading above 50 indicates that the economy is expanding. A reading below 50 indicates that the economy is contracting, and a reading of 50 indicates no change or neutral state.

10 YR yield increases as the economy grows and inflation increases. On the contrary, decreasing yields have a stimulating impact on the economy. Therefore, the YOY Change % of 10 YR yield essentially denotes the peaks and troughs of the business cycle.  

Key Takeaways 

An investor can determine the different phases of the business cycle by tracking Manufacturing PMI and 10 YR yield. This can help them to position their bets in the sectors and assets that benefit in the different parts of the business cycle. For more information on this topic, please refer to our blog regarding business cycle investing.