This page lists ongoing research findings. The models are not static; the continues refinement and research to improve the models is recorded on this page.
Economic indices, each a combination of a different set of economic data, often signal contradictory states of the economy. Not surprisingly, many prominent analysts relying on these indices have made incorrect forecasts. To aid recession forecasting, we now introduce the BCIw, an index derived from our iMarketSignals’ Business Cycle Index (BCI), calibrated in weeks to recession. Yes, you read this correctly; for example, if the BCIw has a value of 19 it indicates that there is a high probability of a recession starting in 19 weeks.
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We analyze financial series based on the previous highest peak of the series in a business cycle, which we term the “off-peak-mode” of an index. Using our BCI in off-peak-mode we achieve average leads to recessions of 20 weeks. Exiting the stock market at these early signals significantly improves investment performance. Furthermore, the current level of the BCI in off-peak-mode near 100 provides confirmation that a recession is not likely to occur within the next year.
Knowing when the U.S. Economy is heading for recession is paramount for successful investment decisions. We have designed the weekly iMarketSignals Business Cycle Index (BCI) so it would have provided early reliably warnings for the past seven recessions. We achieved recessions leads averaging 11 weeks, all with similar lengths. The absence of false positives, for the analyzed time period of 1967 to 2013, enhances the quality and reliability of the recession warnings.
We now discovered that the index is excessively driven by one of its components, the ratio of “ten year treasury bond yield” to “BAA corporate bond yield.”
M2 has been downgraded and excluded as a leading indicator, yet ECRI still include it in their WLI.
Historic Buy and Sell Signals for the MAC and IBH models.
The Shadow WLI stems from an international collaborative effort by Franz Lischka, Georg Vrba, Dwaine van Vuuren, and Doug Short. We publish the final shadow levels one day ahead of the official ECRI WLI for underlying component data to Friday of the prior week.
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The IBH stock market model was updated several times since its original publication in August 2010. Some of the updates were published in Advisor Perspective, and others were published in the weekly newsletter. The IBH model incorporating the latest updates produced a compound average annual return of over 13% from 1966 to 2013 (excluding dividends).