Fall is by far my favorite time of the year. The only problem is, it seems to go by too quickly-especially September! Looking back on the month, it's hard to recall notable news events off the top of my head. Not surprising, given that I can't even figure out how college football is through four games of the season.
So, instead of focusing on the usual quick take on the blah blah of market volatility, I'd like to introduce something new of substance.
I've referenced the EMRI model extensively since starting these recession reviews a few months ago. While that model changes each month with new data, the underlying components are based on quarterly metrics.
The indicator above is a new series built from monthly observations and benchmarked against monthly recession dates, which offers a more exact timing than the quarterly indicator.
In addition, the monthly recession indicator is built on an entirely different set of data as compared to the quarterly indicator. With two different indicators based on two separate data sources, we can now have an additional layer of challenge or confirmation to identify the existance or absence of a recession!
With all that being said, when we get past the usual noise of things that happened during September and look at what both indicators are telling us, the data continues to confirm that there is no recession.
2019Q3 is in the books and now we await the first official quarterly estimate for GDP from the BEA at the end of October. While estimates from various forecasters have deteriorated slightly the past month, there isn't an expectation for anything catastrophically bad.
Will the Fed continue to cut? The market has been right thus far...even when I thought that the Fed wouldn't or potentially shouldn't cut. Just goes to show that it is difficult to bet againt the market!
Very little has changed since last month and that article is still relevant.
2019Q3 is in the books and I don't think we will look back on it as the start of a recession.
For 2019Q4, the impact from the flattening yield continues to pressure overall indicators but there would need to be negative GDP readings to really start some panic. I'll continue with the no recession call.
So, this is a new little topic I will give a few brief words on each month. I tend toward conservative calls because the economy has been in recession only about 10% of the time for several decades. But, if I was forced to make a guess what would I say?
I'm going to go with the call I've been holding for a while now and wrote about several months ago. That is, a recession starting in the second half of 2020. I've held that opinion for probably a year to a year and a half now after looking at some very long term metric cycle trends. Of course, I wasn't tracking it formally so...now I am!
It will be interesting to track not only recession calls but also the anticipation for recession calls. The former I think is doable with some degree of success. But this? This is barely better than a shot in the dark. And, don't let commentators say otherwise. Plenty of research shows that economists are absolutely terrible at predicting the start of a recession. So, I will try to continue that legacy of futility!
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