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Archive | June, 2019

Global Economy affects U.S stock market returns

By RecessionALERT on June 19, 2019 in Research Papers

The global economy is currently in the depths of a synchronized global business-cycle contraction, first highlighted by us in June 2018. In March 2019 we followed up with Global Economic Activity slowing at the fastest pace since 2011. The chart below highlights the Global Leading Economic Indicator together with the percentage of countries tracked that have a rising Leading Economic Indicator: The percentage of countries with a rising LEI is an excellent 2nd-derivative, leading the global LEI consistently through the […]

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Adjusting Fed Funds Rate for QE to predict rate cycle direction changes

By RecessionALERT on June 12, 2019 in Research Papers

The Federal Reserve Funds Rate (Fed Funds Rate) is the interest rate that banks charge other banks for lending them money from their reserve balances on an overnight basis. By law, banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. Any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall. The chart below tracks the Fed Funds […]

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RAVI Warning issued

By RecessionALERT on June 10, 2019 in Reflections

This subscriber-only client alert has now been unlocked for public viewing. NOTE : The RecessionALERT Valuation Index (RAVI) now warrants its own, more detailed, dedicated PDF report which you can now find in the REPORTS>RAVI menu tab: Well, it has finally happened, we have a recession and stock market bear warning from just about every RAVI indicator as at 1Q2019. All of the 8Q average of the 2YR forecast, the 4Q average of the 1YR forecast and the average annualized […]

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Is the U.S Yield Curve Inversion locked in?

By RecessionALERT on June 2, 2019 in Reflections

In our February 2019 commentary we forecast that the 10’s and 1’s yield-curve would invert in May. The data below is taken from that market commentary, with a warning that the indicated dates of recession have a very wide standard deviation over the historical record: The 10’s and 1’s term spread has been inverted since 23rd May, for six sessions now. The question that naturally comes to mind is “how long must the daily yield curve be inverted for us […]

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IMPORTANT DISCLAIMERS: Although many of our models rely heavily on back-testing, optimisation and probability methods, please note that past performance is NO GUARANTEE for future returns. No system devised by man can predict the future, let alone the future of the markets and economies. What we have are sets of mathematical models that use historical data and varying theories to pinpoint places in time when the STATISTICAL LIKELYHOOD of calling the start and end to recessions is the greatest. In the midst of all the best mathematical models, you can have geo-political events, wars, terrorist attacks, natural disasters and even nuclear accidents that tip everything upside down. This is always a risk factor you need to factor in on any recession call no matter how confident you are in a signal. The SuperIndexes are created through mathematical and statistical optimisation techniques that best fit the historical NBER data. There is no guarantee that out-of-sample performance will match that of prior in-sample performance.