Run For The Roses

Weekly Market Commentary 4-28-14

The Kentucky Derby is the longest running sports event in American history. Held the first Saturday in May, three-year-old thoroughbreds gather at Churchill Downs in Kentucky to compete over a blistering two minutes that ends with a blanket of roses draped over the winner. While winning is worth millions, racing horses is a risky endeavor. Fortunately, current conditions in the economy and markets appear to be improving, encouraging corporate leaders, investors, and even horse owners to take the risk and invest.

Thoroughbreds are costly and speculative investments. The prices paid reflect the general willingness of horse owners to take risks. As a result, they are a good indicator of the strength of the economy. Sales of the leading thoroughbred horse auctioneer, Keeneland, fell during the recessions of 1990 – 91, 2001, and 2008 – 09, and then rebounded as conditions improved. The lingering weakness in thoroughbred sales over the past five years, 2009 – 2013, as they remained near levels seen 15 years earlier, coincided with a sluggish global growth environment, as can be seen in the similarly weak pace of business spending on new buildings to expand employees and output.

Click here to read the full commentary from LPL Financial Chief Market Strategist, Jeffrey Kleintop.