Understanding the Schannep Recession Indicator and Its Impact on Market Timing
We’re honored to have our Schannep Recession Indicator (SRI) featured in MarketWatch by Mark Hulbert on 6/14/24. We wrote a must-read article with the evocative title: “The latest unemployment report has triggered this spot-on recession indicator”
Below is the link to the MarketWatch article (likely behind a paywall):
and below is the link to a version not behind a paywall:
Below are the key highlights of Mark’s article:
- Schannep Recession Indicator (SRI) Accuracy
The Schannep Recession Indicator has accurately identified all 12 U.S. recessions since 1946, demonstrating its reliability in predicting economic downturns.
- Recent Recession Signal
The latest signal from the SRI was triggered on June 7, 2024, when the U.S. unemployment rate report for May showed an increase to 4.0%. This rise brought the three-month moving average to 3.9%, surpassing the threshold by 0.4 percentage points and suggesting that a recession is either underway or imminent.
- Timeliness of SRI Signals
The SRI provides recession signals much closer to real-time compared to the National Bureau of Economic Research (NBER). Historically, the average lag between the onset of a recession and the SRI signal is just 1.58 months, offering a timely tool for economic forecasting and market decisions.
Finally, I want to remind our esteemed readers of the SRI’s Stock Market Timing Utility. Beyond predicting recessions, the Schannep Recession Indicator is another valuable tool for timing the stock market. By providing early warnings of economic downturns, investors can make more informed decisions about the right time to sell. Our Subscribers already have a plan to trade the stock market according to the new economic conditions. Do you?
Sincerely,
Manuel Blay
Editor of thedowtheory.com
