There are many ways to measure the strength of the economy, so in the lead-up to Saturday's running of the Kentucky Derby, why not the prices paid at auction for thoroughbred horses?
In his new LPL Financial weekly market commentary, LPL's chief market strategist Jeffrey Kleintop wrote that the prices horse buyers pay reflect their general willingness to take risks, and this is a good indicator of the strength of the economy.
This year, favorable economic and market conditions are encouraging horse owners, as well as corporate leaders and investors, to take the risk and invest, Kleintop wrote.
The median price of two-year-old thoroughbreds in training at this year's April auction hit an all-time high of $200,000, up more than 30% from last year, suggesting that a new environment of risk taking by horse owners may be emerging.
Thoroughbreds are costly and speculative investments, Kleintop wrote. Sales of the 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–'13, coincided with slack in the global growth environment. The pace of business spending on new buildings to expand employees and output was similarly weak.
