From 1948 to 1986, turning points in a new leading inflation index led turning points in the Consumer Price Index growth rate by an average of five months. The first time a six-month smoothed growth rate in the leading index rose above +1.0 per cent was designated as a trough signal; the first time this growth rate went below –1.0 per cent was a peak signal. The signals picked up all the cyclical swings in the inflation rate over the period. Furthermore, the inflation signal dates exhibited a close correspondence with peaks and troughs in interest rates.

Using the signal dates to buy and sell in credit markets would have resulted in substantial gains. Corporate bond yields rose during each of the nine intervals from shortly after a trough signal to shortly after a peak signal. Short and long-term Treasury securities exhibited a similar pattern. The astute bond market speculator could have avoided taking a long position during these intervals. His chances for a capital gain would have been much better during the intervals from shortly after a peak signal to shortly after a trough signal. About 86 per cent of the variation in downswings in corporate bond rates occurred during these periods.