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Last week, markets took a sharp dive following a sudden shift in Japan’s monetary policy, which led to a swift unwinding of the yen carry trade and a wave of panic selling across global stocks. Despite this turbulence, several well-known recession indicators have been flashing red over the past few months, placing investors in a challenging spot.

Even Warren Buffett, historically ultra-bullish on the U.S. economy, has drastically sold off his tech stock holdings and amassing a substantial cash reserve, hinting at something looming.

While traditional indicators provide valuable insights, today we’re exploring some unconventional metrics. These quirky, less-known indicators may not be foolproof, but they offer a unique lens through which to view economic trends. Let’s delve into these offbeat signals and uncover what they might reveal about the current economic landscape.

_{Lipstick Index}

What is it?

The lipstick index was popularized by Leonard Lauder, a billionaire from the Estée Lauder cosmetics family. Back in 2001, during a U.S. recession, Lauder observed that lipstick sales were actually rising. His idea was that when the economy declines, people buy more affordable luxuries like lipstick, instead of things like dresses and shoes.

According to Zubin Sethna, a professor specializing in entrepreneurial marketing and consumer behavior, the psychology behind the "lipstick effect" is "deeply rooted in how consumers seek emotional gratification and comfort during stressful times." He explains that minor purchases offer "an accessible form of temporary escapism" which can trigger a "dopamine rush and provide a psychological lift."

Can it predict a recession?

Historically, the lipstick index has shown some patterns. For instance, lipstick sales went up by 11% when Lauder introduced the concept, and major cosmetics brands saw increased sales during the 2008 recession. Even with high inflation recently, beauty product sales have been strong. However, lipstick sales can also rise during economic good times and fall during downturns, so it’s not always a reliable predictor.

Underwear Index

What is it?

The underwear index, made famous by former Federal Reserve Chair Alan Greenspan, suggests that when the economy worsens, people buy fewer new underwear because it’s less visible. As the economy improves, people start replacing their old underwear.

“He once told me that … the garment that is most private is male underpants, because nobody sees it except people in the locker room, and who cares?” longtime NPR correspondent Robert Krulwich said of Greenspan years ago. Those sales are usually stable, “so on those few occasions where it dips, that means that men are so pinched that they are deciding not to replace underpants.”

Can it predict a recession?

The theory has had some successes. Men’s underwear sales dropped during the Great Recession of 2008-2009 and saw a rise afterward. Similarly, sales fell dramatically in 2020 during the pandemic but rebounded in 2021. However, this indicator isn’t foolproof.

In 2024 the men's underwear segment in the United States was estimated to generate a revenue of approximately four billion dollars, by far the highest of the displayed segments.

Stripper Index

What is it?

The Stripper Index is a quirky, unofficial economic measure that looks at the earnings of strippers to gauge economic health. The idea is that if strippers, who rely on cash tips, experience a significant drop in their income, it may signal economic trouble. This index reflects consumer spending at a niche level, similar to how broader economic indicators measure overall consumer behavior.

Can it predict a recession?

While not a traditional economic indicator, there’s some anecdotal evidence supporting the Stripper Index. Reports from dancers have shown reduced earnings during tough times. For instance, a dancer quoted in The Guardian noticed her income dropped by half in December compared to the previous year, and others in Vegas reported similar trends. Additionally, a Florida entertainer mentioned that the financial strain people are feeling is reflected in lower earnings at strip clubs. Some Twitter users and entertainers have even suggested that a downturn in club revenue can be an early sign of economic trouble.

Though not foolproof, the Stripper Index provides an interesting perspective on economic conditions, offering a glimpse into consumer spending from a unique angle.

Big Mac Index

What is it?

The Big Mac Index, introduced by The Economist in 1986, is a quirky yet insightful measure of purchasing power parity (PPP) between two currencies. It simplifies the concept of PPP by comparing the price of a Big Mac hamburger, sold at McDonald’s restaurants worldwide, to gauge how currencies stack up against each other. Essentially, it offers a fun way to see if currencies are under or overvalued based on the price of this universally recognized fast-food item.

Can it predict a recession?

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