RecessionALERT informs you in advance of the risks & probability of a U.S recession and couples this with U.S stock market asset allocation and market-timing models. We do this through various weekly and monthly PDF reports, live timing model and charts heads-up-displays, as well as insightful subscriber-only research from our RESEARCH section and occasional commentary from our REFLECTIONS blog.
We have an “all-you-can eat” collection of 2 weekly and 6 monthly high-frequency reports that are published 14 times during the course of any month. We also offer a host of robust market timing models for investors and traders alike that are updated in real-time on our CHARTS menu. All this is offered for a single $399 per year non-auto renewable subscription. Recent samples can be downloaded below (no obligation, no emails required).
0. U.S Stock Market Timing
We offer a unique blend of traditional econometrics coupled with stock market timing methodology to assist traders, private investors and fund managers to outperform the market on an absolute and risk adjusted returns basis. The current U.S market timing methodologies we offer are discussed in this Market Timing Summary. Our econometric reports are covered below:
1. Global Economic Report [1st WEEK OF EACH MONTH, sample report up to Dec 2012]
This offers a global view to our clients as part of our overall U.S Recession determination efforts. The U.S economy is not an island in this global economy and the economic health of other countries have an impact on the U.S one way or another. This innovative visual report was developed in conjunction with various global Fund Managers to offer “at a glance” views of what is happening with any economy anywhere in the globe and looks at up to 80 countries’ GDP, Leading Economic Indicators (LEI’s) and Import/Export volumes. Most of our institutional clients agree that the yearly subscription is worth this single report alone.
2. Recession Forecasting Ensemble (RFE) & SuperIndex Report [EVERY MONDAY, sample report up to 27 Jul 2012]
The RFE is a collection of diversified recession forecasting methodologies that differ in data, approach and theory to offer us an over-arching recession dating, forecasting and asset-allocation approach that is resilient to “model risk”. Recession forecasting is an art and not a science. There is no “one size fits all” model that performs well in the past and is guaranteed to perform well into the future. Every recession is different. Since recession calls are “high stakes” events, with costly consequences for either calling a recession when there is none (as with the recent ECRI call that cost investors who heeded it 28% in lost stock market gains) or failing to call a recession and getting caught in the average 30% recessionary draw-down, we need to be very sure when we make a call. The only way to do that is by consulting multiple robust models that are not too correlated with each other in make-up or methodology. The RFE allows you to manage a delicate balancing act between early warning and accuracy.
3. NBER co-incident Recession Model Report [END OF EACH MONTH, sample report up to 16 Nov 2012]
This model uses the exact monthly economic indicators deployed by the National Buro for Economic Research (NBER) for their recession dating determinations. It provides recession dating some 8 months before the NBER official proclamations. It is not part of our RFE, but is an outside “reference of last resort” to determine if we are already in recession or not. The model is highly resilient to revisions and data mining as shown by our detailed research note titled “The NBER co-incident Recession Model – “confirmation of last resort”
4. NBER Gross Domestic Product (GDP) & Income (GDI) Report [QUARTERLY, sample report up to 3Q2012]
It is clear when reading various pronouncements made by the NBER Business Cycle Dating Committee that the two broadest measures of economic activity, real Gross Domestic Product (real GDP) and real Gross Domestic Income (real GDI) are very important in their determinations.This recession probability model examines the quarterly economic indicators examined by the NBER for their recession dating determinations. It is not part of our RFE, but is an outside “reference of last resort” to determine if we are already in recession or not. This report, coupled with the previous report, serve as a comprehensive view on all data the NBER will be examining in proclaiming recession. A detailed research note “Estimating Recession probabilities with GDP & GDI” explains the theory and graphic examples of how well this model works.
5. Labor Market Report [1ST WEEK OF EACH MONTH, sample report up to 2 Nov 2012]
The Labor Market Growth Index (LMGI) groups together in a weighted composite, six labor-market related measurements provided by the Bureau of Labor Statistics (BLS), normally within the first Friday falling between 5th-11th of the month. Each of the six indicators chosen from the many provided by the BLS, have been found to be reliable in describing & predicting turning points in the U.S economic cycle as defined by the NBER. The LMGI also serves as an authoritative, broad, at-a-glance representation on general U.S labor market conditions. One of the major advantages of the LMGI is that all six of its components are published right at the beginning of each month, giving us a much earlier comprehensive view of the U.S economy than other composite indicators that are made up of data released throughout the course of a month. Additionally, the FED has made noises recently of tying their interest rate decisions to various labour market components meaning that this is going to be the indicator to watch in 2013. Included in the report is the popular Yellen Labor Dashboard that also tracks 9 labour market measurements followed by the FED.
6. Composite U.S Market Health Index – CMHI [last week of each month, sample report up to 7th Mar 2013]
The CMHI measures SP-500 bull-market health through a broad, diverse array of 7 indicators that reliably warn of bear markets. The approach is comprehensively described in our very popular research note titled “Seven paw-prints of the Bear” which was downloaded over 20,000 times since publication. There are three market breadth indicators, two price-action indicators, a composite leading economic indicator and a Seasonality indicator. These are combined into an equally weighted composite signal. The higher the CMHI the more bullish the market and the lower the CMHI the more bearish the market. Generally we want to be in cash when the CMHI is less than zero. A Diffusion is also shown to guide you with stock market exposure. In addition to the monthly report below we also publish the CMHI and all its components daily in our CHARTS menu.
7. U.S Long Leading Growth Index [1ST WEEK OF EACH MONTH, sample report up to Oct 2013]
The USLLGI takes a far-reaching forward view of U.S economic growth by tracking 6 reliable indicators which have consistently peaked 12-18 months before the onset of NBER defined recessions since the early 1950’s. The growths of these 6 indicators, together with their diffusion index, are combined into a 7-factor composite to give a generalized view of future overall U.S economic growth. When this growth composite falls below zero for 2 consecutive months you have a signal that U.S recession will occur in 12-18 months time on average. The slope and direction of USLLGI thus depicts the expected outcomes of the U.S economic growth 12 months ahead in time. The 6 indicators chosen are well researched and documented over the decades as being reliable long-leading indicators although we have modified 3 of them to minimise potential risks of distortions from structural changes introduced by the Great Recession of 2008/9.
8. U.S Short-Leading Economic Growth Index [2nd WEEK OF EACH MONTH, sample report up to July 2014]
The U.S Monthly Leading Index (USMLI) is a composite index that attempts to capture future (6-9 months) U.S economic growth. The index has been constructed since 1960 and consists of 10 sub-components that are in turn constructed from over 100 discreet monthly and weekly leading time-series data that capture the essence of U.S future economic growth from varying aspects, namely Manufacturing , Inventories & Sales , the Housing, Lumber & Construction markets , Freight shipments & revenues , broad Employment, the Stock market & associated margin debt, the Treasury & Corporate Bond markets, the broad Credit Markets, various Sentiment Surveys and percentage of 50 individual State Leading indexes showing growth.
9. Stock Market Valuation model for predicting future returns (RAVI)
Very popular among our institutional clients, the RecessionALERT Valuation Index (RAVI) examines 10-year cyclically adjusted trailing SP-500 earnings, the SP-500 index level, total stock market capitalization, Gross Domestic Product, total SP-500 corporate liabilities, total SP-500 corporate net-worth and percentage of investors allocation to stocks versus cash and bonds to determine 10, 5, 3, 2 and 1 year forecasts for the SP-500 Total Return Index (dividends re-invested). The remarkable historical accuracy of the various forecast horizons since 1970 are shown below:
10. Historical Data Analysis Tool
This allows you to view all major recession models we maintain in a side-by-side fashion during each expansion and recession. This allows detailed inspection of the co-movement of our various short-leading, long-leading and co-incident recession models. In addition, clients can select their favourite RecessionALERT quantitative models and combine them together into a custom composite and view the behaviour of the composite and its components over time. This allows financial advisers and brokerage firms to custom-build robust recession models unique to their practice or brand for input into the overall quantitative process used by them to manage their clients affairs. All data can be imported into your own quantitative models. The Analysis Tool is discussed over here.
Subscriptions are US$399 per year once-off upfront payment for access to ALL the above reports, that are published 17 times per month. Reports are all in PDF format and archived in real-time in the members download section of the web site. Each report is time-stamped and there are also individual tabs to view archives of specific report types. You receive notifications via our private Twitter feed whenever new reports are published.