A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the June figure of 5.3%, does not signal a recession now.
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Blog Archives
The Unemployment Rate is Not Signaling a Recession: Update July 3, 2015
Minimum Volatility Stocks: Does Frequent Trading Result in Better Returns?
- Two trading models are compared which select periodically 8 large-cap minimum volatility stocks from the Health Care, Consumer Staples, and Utilities sectors of the S&P 500.
- The models only differ from each other with regard to hedging, and sell rules which extend stock holding periods for one model to longer than one year.
- Backtests over a 15.5 year period show similar average annualized returns of about 36% for both models, but the number of realized trades differ, 148 versus 618.
- The analysis shows that in this case, and perhaps in general, frequently trading minimum volatility stocks does not necessarily produce better returns than for one year minimum holding periods.
Best8(S&P500 Min-Volatility)-Tax Efficient Large-Cap Portfolio Management System With Minimum Volatility Stocks of the S&P 500
- This model invests periodically in eight highly liquid large-cap stocks selected from those considered to be minimum volatility stocks of S&P 500 Index.
- Most stock positions are held for longer than one year resulting in a Tax Efficiency ratio of 81.4%.
- When adverse stock market conditions exist the model shorts the 3x leveraged Ultrapro S&P500 ETF (UPRO) – hedge/current holding ratio= 45%.
- It produced a simulated average annual return of about 36% from Jan-2000 to end of June-2015.
Minimum Volatility Stocks: 1 year Out-Of-Sample Performance of iM’s Best12(USMV) Models
- Portfolios of the 12 top ranked stocks of the iShares MSCI USA Minimum Volatility ETF provided much higher 1-year returns than the ETF.
- For the period 6/30/14 to 6/18/15, our Best12(USMV)Q3-Investor, a 1-year buy&hold portfolio, returned 26.0%,
- The Best12(USMV)-Trader, re-balanced every 2 weeks, returned 29.3%,
- iShares MSCI USA Minimum Volatility ETF USMV returned 13.3% for the same period..
The Unemployment Rate is Not Signaling a Recession: Update June 5, 2015
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the May figure of 5.5%, does not signal a recession now.
Read more >
The Forward Rate Ratio: Predictor Of An Ongoing Stock Bull- And Bond Bear-Market
- Prior to recession the yield curve becomes inverted, as indicated by the Forward Rate Ratio between the 2-year and 10-year U.S. Treasury yields (FRR2-10) being less than 1.00.
- The FRR2-10 has recently peaked at about 1.20 signifying that US economic activity is in the expansion phase of the business cycle, far away from the next recession, with ongoing gains for the stock market predicted.
- Typically after peaks of FRR2-10 the yield of 10-year Treasuries rises, signaling a bond bear-market.
- When FRR2-10 falls to near 1.00 the transition from expansion to boom occurs. The average lead time after FRR2-10 becomes less than 1.00 to the subsequent recession start was 14 months for the last seven recession.
The Forward Rate Ratio: A Long Leading Recession Indicator
- Prior to recession the yield curve becomes inverted, as indicated by the Forward Rate Ratio between the 2-year and 10-year U.S. Treasury yields (FRR2-10) being less than 1.00.
- Currently the FRR2-10 is about 1.20 signifying that US economic activity is in the expansion phase of the business cycle, far away from the next recession.
- When FRR2-10 falls to near 1.00 the transition from expansion to boom occurs. For the last seven recessions the average lead time after FRR2-10 becomes less than 1.00 was 14 months.
The Unemployment Rate is Not Signaling a Recession: Update May 8, 2015
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the April figure of 5.4%, does not signal a recession now.
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There is no reason why the Fed should increase the Federal Funds Rate any time soon – Update April 2015
- The Trade Weighted US Dollar Index has been growing since Q4 2011. Its growth increasing over the last nine months.
- The annual rise in CPI is below 2%, and the US economy remains relatively weak.
- The US Market is attracting foreign capital that is fleeing their local currency devaluation.
- There is no reason for the Fed to increase interest rates under these conditions.
- Interest rates will probably rise only once the dollar reverses its gains.
The Unemployment Rate is Not Signaling a Recession: Update April 4, 2015
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the March figure of 5.5%, does not signal a recession now.
Read more >
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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