MARKET EFFECT

ECONOMIC INDICATOR

12-MONTH TREND

July 2019

Back in April, the model indicated the probability of the market hitting a new high was greater than it going into a recession. In this month, the forecast became reality. Since April though, the yield curve has officially inverted meaning that the yield on the 10-year Treasury note is lower than the yield on a 3-month bond. Although the inversion of the yield curve is a good indicator for the risk of a recession, we don’t know if the recession will materialize in 6 months, 18 months, or even longer based on the indicator alone. The goal of Recession Spy is to accurately forecast the onset of a major recession within a month of it materializing. As of now, economic indicators contributing to the upward momentum still include low unemployment, retail sales, manufacturing, durable goods, and a flattening of the federal funds rate. The same weak indicators also continue to persist from April namely new housing permits data and the 10-year treasure rate. Overall, the probability is still greater of the market going up and hitting new highs rather than going into recession as it was back in April.

 April 2019

The model continues to correctly show that there is no recession yet in the very immediate future as the manufacturing sector continues to expand. Economic indicators contributing to the upward momentum include low unemployment, retail sales, manufacturing, durable goods, and a flattening of the federal funds rate. There is some weakness in new housing permits data and the 10-year treasure rate, but overall, the probability is still greater of the market going up and hitting new highs rather than going into recession.

Unemployment Rate
Retail Index
ISM Index
M2 Money Supply
Manufacturer’s New Orders
New Housing Permits
10-Year Treasury Rate
Federal Funds Rate
Consumer Price Index
Volatility Index

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