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A September Unemployment Rate of 4.0% Will Signal a Recession

Posted on Sep 2, 2023 by Anton Vrba — 1 Comment ↓

A reliable source for recession forecasting is the unemployment rate (UER), which can provide signals for the beginnings and ends of recessions.
The model was published in 2012 and has correctly signaled the 2020 recession.
The latest UER (August 2023) is 3.8%, signifying no recession. However, if the September UER is 4% or higher a recession will be signaled according to the model.

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Stocks Are Moderately Overvalued And 10-Year Forward Returns Look Reasonably Good: Update July 2023

Posted on Jul 28, 2023 by Anton Vrba — No Comments ↓

The average of S&P 500 for July-2023 was 4,497 (4% down from Dec-2021 high average of 4,675) and is 859 points higher than the corresponding long-term trend value of 3,638.
For the S&P 500 to reach the corresponding long-trend value would entail a 20% decline from the July average value, indicating that the S&P 500 is moderately overvalued.
The Shiller CAPE-ratio is at 30.9, 19% higher than its 35-year moving average (MA35), currently at 26.1, forecasting a 10-year annualized real return of about 6.5%.
The long-term trend indicates a forward 10-year annualized real return of 4.4%

Posted in 2020, blogs, featured

iM’s Business Cycle Index Recovers but still Signals a Recession – Update 6/9/2023

Posted on Jun 8, 2023 by Anton Vrba — No Comments ↓

Knowing when the U.S. economy is heading for recession is paramount to successful investment decisions.
Our weekly Business Cycle Index would have provided early reliable warnings for the past seven recessions and signaled the Covid 2020 recession one week late.
The BCIg has signaled a recession warning mid March 2023, but BCIg recovered and is no longer signalling a recession.
However the BCIw, also on recovery path, continues to signal a recession which now is estimated to begin in 9 to 22 weeks.
It is too early to say if a recession has been averted, more likely is it is delayed towards the end the end of 2023 or begin 2024.

(click to enlarge)

Tagged with: BCI
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Timing The Stock Market With The Conference Board Leading Economic Index

Posted on Apr 23, 2023 by Georg Vrba — 6 Comments ↓

This ETF trading model uses the Conference Board Leading Economic Index to determine “Risk-On” periods for equities.
A universe is defined from the SPDR, Vanguard, and PowerShares ETF providers for the sectors healthcare, energy, communication, technology, and general multi-sector funds, holding large-mega cap stocks from the United States.
The model selects 3 ETFs from the previously defined universe at the beginning of a “Risk-On” period and holds these ETFs continuously until the end of the “Risk-On” period.
During “Risk-Off” periods for equities it goes to the gold ETF (GLD) to maximize returns. ETF (BND) is also a suitable alternative to GLD.
The simulation shows that this strategy would have produced over 7-times the total return of SPY with similar risk.

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Stocks Are Moderately Overvalued but 10-Year Forward Returns Look Good: Update April 2023

Posted on Apr 12, 2023 by Georg Vrba — No Comments ↓

The average of S&P 500 for March-2023 was 3,969 (15% down from Dec-2021 average of 4,675) and is 384 points higher than the corresponding re-calibrated long-term trend value of 3,585.
For the S&P 500 to reach the corresponding long-trend value would entail a 10% decline from the March average value, indicating that the S&P 500 is not significantly overvalued anymore.
The Shiller CAPE-ratio is at 27.9, 8% higher than its 35-year moving average (MA35), currently at 25.9, forecasting a relatively high 10-year annualized real return of about 7.3%.
The long-term trend indicates a forward 10-year annualized real return of 5.5%
However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.

Posted in 2020, blogs, featured

iM’s Business Cycle Index Signals an Imminent Recession – Update 4/7/2023

Posted on Apr 6, 2023 by Anton Vrba — 1 Comment ↓

Knowing when the U.S. economy is heading for recession is paramount to successful investment decisions.
Our weekly Business Cycle Index would have provided early reliable warnings for the past seven recessions and signaled the Covid 2020 recession one week late.
The Department of Labor backward revised nearly two years of seasonal adjusted data.
The BCIg is now signalling a recession since mid March 2023 with a 12 weeks average lead time.
The BCIw is now signalling a recession, earliest in 5 weeks but not later than 17 weeks.

(click to enlarge)

Tagged with: BCI
Posted in blogs, featured

Expect Further Losses For Stocks but 10-Year Forward Returns Look Better: Update December2022

Posted on Dec 3, 2022 by Anton Vrba — No Comments ↓

The average of S&P 500 for Nov-2022 was 3,917 (16% down from Dec-2021 average of 4,675) and is 385 points higher than the corresponding re-calibrated long-term trend value of 3,532.
For the S&P 500 to reach the corresponding long-trend value would entail a 10% decline from the November average value, indicating that the S&P 500 is not significantly overvalued anymore.
The Shiller CAPE-ratio is at 28.3, 10% higher than its 35-year moving average (MA35), currently at 25.8, forecasting a relatively high 10-year annualized real return of about 7.2%.
The long-term trend indicates a forward 10-year annualized real return of 5.5%
However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.

Posted in 2020, blogs, featured

An Upcoming Recession is Signaled by the Forward Rate Ratio

Posted on Aug 5, 2022 by Anton Vrba — No Comments ↓

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 crosses 1.000 downward signifying that US economic activity is in the boom phase of the business cycle, nearing the next recession.
The average lead time after FRR2-10 becomes less than 1.00 to the subsequent recession start was 14 months for the seven of the eight last recessions.

Tagged with: Recession
Posted in blogs, featured

Expect Further Losses For Stocks And Very Low 10-Year Forward Returns: Update July 2022

Posted on Jul 2, 2022 by Anton Vrba — No Comments ↓

The average of S&P 500 for May 2022 was 4,040 (14% down from December 2021 average) and is still 1,469 points higher than the corresponding long-term trend value of 2,571.
For the S&P 500 to reach the long-trend would entail a 36% decline from the May average value, possibly over a short period.
The Shiller CAPE-ratio is at a level of 31.0. That is 21% higher than its 35-year moving average (MA35), currently at 25.6.
The CAPE-MA35 ratio is at 1.21 (down from the December 2021 level of 1.51), forecasting a 10-year annualized real return of about 6.3%.
However, rising inflation with a falling CAPE-MA35 ratio, similar to what occurred in the period 1964-1973, implies very low or negative 10-year forward annualized real returns.
The historic long-term trend indicates a 10-year forward real annualized return of only 1.9% (up from the December 2021 forecast of 0.2%).

Posted in 2020, blogs, featured

The iM-Inflation Attuned Multi-Model Market Timer

Posted on May 13, 2022 by Georg Vrba — 51 Comments ↓

Investment risk can be reduced by a multi-model market timer whose many components use different and uncorrelated financial and economic data, including inflation.
This model seeks to determine effective asset allocation for risk-on and risk-off periods for equities considering the effect of inflation.
Four risk scenarios are possible: risk-on & normal-inflation, risk-on & high-inflation, risk-off & normal-inflation, and risk-off & high-inflation. Different ETF groups apply to each risk scenario.
From 2000 to 2022, switching accordingly between risk-related ETF groups would have produced an annualized return of about 39% versus 6.5% for buy and hold SPY.

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