Past Recessions and Bellwether Companies
You certainly can’t lean too heavily on an individual company as a predictor of how the broader economy is doing. After all, declining revenues could mean lower demand, but it could also just be a bad year for the sales team.
That said, there are plenty of cases where companies have proven to be the proverbial canary in the coal mine. European cardboard company Smurfit Kappa Group saw operating profits from 2007 to 2008 in what proved to be a sign of a coming storm.
Likewise, if you look at Caterpillar’s historic stock chart, the company’s stock peak during the booming 1990s came in April 1997, just over two years before the S&P 500 topped out and started to retreat in September 2000.
