Tuesday, September 22, 2015

Go USA! (excerpt)

S&P 500 forward earnings is highly correlated with the US index of coincident economic indicators (CEI). The latter rose to another new record high during August. Previously, I have observed that based on the past five cycles in the CEI, the next recession should start during March 2019. That’s not based on science, but rather on a simple average of the length of the previous expansions once the CEI had rebounded back to its previous cyclical peak. So it’s a benchmark of what could happen based on what happened in the past on average.

In any event, I’ve circled March 2019 as the possible date for the next recession. Given the Fed’s latest decision to do nothing, it’s safe to bet that the next recession won’t be caused by the tightening of monetary policy anytime soon. It could be caused by a severe downturn abroad, I suppose. More likely is that the US will continue to grow fast enough to keep the global economy growing as well, albeit at a pace that is best described as “secular stagnation.”

Today's Morning Briefing: NZIRP Forever. (1) Stock investors facing conundrum. (2) Fed upgrades Global Secular Stagnation scenario. (3) Long-term earnings growth (LTEG) forecasts remain remarkably high and stable. (4) STEG forecasts more volatile. (5) PEG ratio may be misleading now. (6) Investors curbing enthusiasm for growth, for now. (7) Flash crashes come and go. (8) Do Q3 and Q4 earnings matter? (9) Heady earnings estimates for 2016 and 2017. (10) Revenues growth rebound expected for next year. (11) Back to the future: The recession of 2019. (12) Yellen’s like-minded friends. (13) Yellen says that Fed doesn’t need to tighten if markets do so. (14) Bounded to the zero bound. (More for subscribers.)

No comments: