This Recession Indicator Has Been Foolproof for 70 Years: Here's What It Says Happens

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serendipity

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Over long periods, Wall Street is a money machine that's handily outperformed the average annual returns of commodities like oil and gold, bonds, and bank certificates of deposit. But on a year-to-year basis, the stock market can be somewhat of a crapshoot, as investors found out last year.

When the curtain closed on 2022, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and technology-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC) all entered respective bear markets and produced their worst returns since 2008. The abysmal performance of these core stock indexes has a lot of investors asking whether a U.S. recession is unavoidable.

Unfortunately, there is no crystal ball that allows us to look into the future and know with concrete certainty whether a recession is coming. However, there is a somewhat off-the-radar indicator that's correctly forecasted U.S. recessions -- without fail -- over the past 70 years. Based on historic data, it's quite clear what happens next.

This recession-forecasting index hasn't been wrong since the early 1950s
Many tenured investors are probably familiar with the U.S. ISM Manufacturing Index released by the Institute of Supply Management (the "ISM" in the Index's name) each month. This index, also referred to as the Purchasing Managers Index, is based on data gathered from the responses of executives with more than 400 industrial companies. Without getting too far into the weeds, the ISM Manufacturing Index is a composite of five seasonally adjusted components: new orders, employment, production, supplier deliveries, and inventories.

Thankfully, you don't have to be an economist or even a tenured investor to understand ISM Manufacturing Index readings.

Imagine there's a scale between 0 and 100 and you've drawn a line in the sand at 50. This is your baseline. Any figure above 50 represents expansion in manufacturing activity in the industrial sector, whereas any figure below 50 implies contraction in manufacturing activity. The further you move from 50, the more pronounced the strength or weakness in manufacturing activity. As I said, it's all pretty straightforward, and ISM handles all the calculations.

However, the U.S. ISM Manufacturing Index isn't the indicator with the immaculate track record of calling recessions for the past 70 years. That honor goes to one of its subcomponents: the U.S. ISM Manufacturing New Orders Index.

Read more: https://www.nasdaq.com/articles/thi...for-70-years:-heres-what-it-says-happens-next
 
serendipity said:
Over long periods, Wall Street is a money machine that's handily outperformed the average annual returns of commodities like oil and gold, bonds, and bank certificates of deposit. But on a year-to-year basis, the stock market can be somewhat of a crapshoot, as investors found out last year.

When the curtain closed on 2022, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and technology-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC) all entered respective bear markets and produced their worst returns since 2008. The abysmal performance of these core stock indexes has a lot of investors asking whether a U.S. recession is unavoidable.

Unfortunately, there is no crystal ball that allows us to look into the future and know with concrete certainty whether a recession is coming. However, there is a somewhat off-the-radar indicator that's correctly forecasted U.S. recessions -- without fail -- over the past 70 years. Based on historic data, it's quite clear what happens next.

This recession-forecasting index hasn't been wrong since the early 1950s
Many tenured investors are probably familiar with the U.S. ISM Manufacturing Index released by the Institute of Supply Management (the "ISM" in the Index's name) each month. This index, also referred to as the Purchasing Managers Index, is based on data gathered from the responses of executives with more than 400 industrial companies. Without getting too far into the weeds, the ISM Manufacturing Index is a composite of five seasonally adjusted components: new orders, employment, production, supplier deliveries, and inventories.

Thankfully, you don't have to be an economist or even a tenured investor to understand ISM Manufacturing Index readings.

Imagine there's a scale between 0 and 100 and you've drawn a line in the sand at 50. This is your baseline. Any figure above 50 represents expansion in manufacturing activity in the industrial sector, whereas any figure below 50 implies contraction in manufacturing activity. The further you move from 50, the more pronounced the strength or weakness in manufacturing activity. As I said, it's all pretty straightforward, and ISM handles all the calculations.

However, the U.S. ISM Manufacturing Index isn't the indicator with the immaculate track record of calling recessions for the past 70 years. That honor goes to one of its subcomponents: the U.S. ISM Manufacturing New Orders Index.

Read more: https://www.nasdaq.com/articles/thi...for-70-years:-heres-what-it-says-happens-next
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You've been warned by NASDAQ no less.
 
Buckle up,...wear a strap on,....pack a gun,......and keep some cyanide in your back pocket as a last resort. You've been warned....:laugh: Daily I might add by Hawkeye! ;)
 
Stone said:
Buckle up,...wear a strap on,....pack a gun,......and keep some cyanide in your back pocket as a last resort. You've been warned....:laugh: Daily I might add by Hawkeye! ;)
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People are waking up, but too slowly and too late.

I did my part to help.
 
If people had bothered to get themselves educated we would not be where we are, this catastrophe is born from ignorance and hubris....how civilizations generally die.
 
Bank of America’s Moynihan says firm is preparing for US debt default

Bank of America CEO Brian Moynihan on Monday said the firm is preparing for the U.S. to default on its debt after surpassing its borrowing limit last month.

Lawmakers are locked in talks about whether to lift the debt ceiling, with Republicans insisting on spending cuts before a deal to raise the limit is struck, and economists are warning of financial crisis if a default does occur.

https://thehill.com/policy/finance/...rica CEO Brian,its borrowing limit last month.
 
serendipity said:
Nowhere to be seen!!!
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Isn’t that sweet. You’ve bee been waiting for me to show up so you can hump my leg again. I’m flattered but I’m taken. Sorry. It appears I have you talking to yourself. Kinda pathetic dude.

There is ALWAYS a recession coming. Given growth and job numbers I’d expect this one to be mild and short. It was priced into the markets last year. They are way up in 2023. Chicken little (Hawkeye) has Ben blabbering for years. Buckle up? The car never moves.

Bottom line the single biggest threat to the US economy is the idiots threatening not to raise the debt ceiling. So expect a cliffhanger preceded by a market over correct and a huge recovery. We won’t default. Of course BOA is planning for a default as is every financial institution. It would be malpractice not to.. Thatd doesn’t mean they expect it. It won’t happen. It will cost McCarthy the gavel but he will stop the lunatics who want to commit economic suicide.

Sorry to disappoint you.
 
Concart said:
Isn’t that sweet. You’ve bee been waiting for me to show up so you can hump my leg again. I’m flattered but I’m taken. Sorry. It appears I have you talking to yourself. Kinda pathetic dude.

There is ALWAYS a recession coming. Given growth and job numbers I’d expect this one to be mild and short. It was priced into the markets last year. They are way up in 2023. Chicken little (Hawkeye) has Ben blabbering for years. Buckle up? The car never moves.

Bottom line the single biggest threat to the US economy is the idiots threatening not to raise the debt ceiling. So expect a cliffhanger preceded by a market over correct and a huge recovery. We won’t default. Of course BOA is planning for a default as is every financial institution. It would be malpractice not to.. Thatd doesn’t mean they expect it. It won’t happen. It will cost McCarthy the gavel but he will stop the lunatics who want to commit economic suicide.

Sorry to disappoint you.
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You may well be right but I just love how you think that you are some kind of economic guru. There is a good chance that a long and deep recession is in the offing, only a fool would dismiss that possibility so airily.
 
serendipity said:
You may well be right but I just love how you think that you are some kind of economic guru. There is a good chance that a long and deep recession is in the offing, only a fool would dismiss that possibility so airily.
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My opinion, unlike yours, is informed. It is what it is. I've been managing my own money for 44 years. I have a masters degree in economics. Could I be wrong? Sure. Things change. But you chicken littles that have been screaming that the sky is falling are doing so strictly for partisan reasons. The economy doesn't care about politics.
 
Concart said:
My opinion, unlike yours, is informed. It is what it is. I've been managing my own money for 44 years. I have a masters degree in economics. Could I be wrong? Sure. Things change. But you chicken littles that have been screaming that the sky is falling are doing so strictly for partisan reasons. The economy doesn't care about politics.
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Yeh we know you've told us often enough, time will tell who is right.
 
serendipity said:
Yeh we know you've told us often enough, time will tell who is right.
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Hey, you were the one begging for my attention. I'm not sure why since you've said nothing of substance in response to what I posted. Oh well. Maybe next time.
 
Concart said:
Hey, you were the one begging for my attention. I'm not sure why since you've said nothing of substance in response to what I posted. Oh well. Maybe next time.
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How about you address post number 2, any danger of that? So what great enlightenment have you revealed so far? The economic cycle for one, do you have a masters to learn about that? I seem to recall that Keynes was a great believer in deficit spending but also paying back in the upswing part of the economic cycle. Gordon Brown liked to talk about the Golden Rule which states that over the economic cycle, the Government will borrow only to invest and not to fund current spending. I can see that means little to you.
 
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