• 366 days Will The ECB Continue To Hike Rates?
  • 367 days Forbes: Aramco Remains Largest Company In The Middle East
  • 368 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 768 days Could Crypto Overtake Traditional Investment?
  • 773 days Americans Still Quitting Jobs At Record Pace
  • 775 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 778 days Is The Dollar Too Strong?
  • 778 days Big Tech Disappoints Investors on Earnings Calls
  • 779 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 781 days China Is Quietly Trying To Distance Itself From Russia
  • 781 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 785 days Crypto Investors Won Big In 2021
  • 785 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 786 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 788 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 789 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 792 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 793 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 793 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 795 days Are NFTs About To Take Over Gaming?
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Those Who Fail to Learn from the Leading Indicators Are Bound to Be Late on Their Recession Call

On a year-over-year basis, the quarterly average of the index of Leading Economic Indicators (LEI) began contracting in the first quarter of 2007. With the exception of the third quarter of 2007, the quarterly average of the LEI has continued to contract. We alerted our readers that multiple consecutive quarters of year-over-year contractions in the LEI usually were the harbinger of recessions. We had ignored the history of the LEI's recession-predictive powers in the past and were determined not to repeat that mistake. Many of our mainstream peers mocked the message being sent by the Leading Indicators, derisively referring to them as the Mis-Leading Indicators. Now, of course, everyone knows that the U.S. economy has entered a recession even though the NBER has not gotten around to acknowledging it. We also knew that the S&P 500, a component of the LEI, usually peaks before a recession sets in. That is why it is helpful for investors to know when a recession is imminent. It does investors little good to know it months after the recession has begun.

The index of Coincident Economic Indicators (CEI) peaked in October 2007. It is likely that the NBER will declare that the onset of this recession began in the first quarter of 2008.

Below is a chart of the year-over-year percent changes in the quarterly averages of the LEI and the CEI. Investors might be wise to study it, save it and update it.

Chart 1

 

Back to homepage

Leave a comment

Leave a comment