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Neighbors of DuPage

Five forecasters

Oct 31, 2016 11:00AM ● By Neighbors Magazines

by Angelo R. Imbrogno

The Five Forecasters are five indicators that, collectively, have historically signaled increasing fragility of the U.S. economy and a transition to the late stage of the economic cycle, with increased potential of an oncoming recession. Although bear markets (defined as a 20% or more drop in the stock market) are not always accompanied by recessions, more often than not they come together. As a result, we believe these indicators can be used to give some advance warning of a bear market. Currently, these indicators are sending mostly mid-cycle signals. Two of the five indicators are flashing yellow and suggest the cycle has moved past the midpoint, as we suspect, while three indicators are still benign.

The Five Forecasters are signaling economic growth and the continuation of the bull market. The yield curve and LEI are sending positive signals, while market breadth offers confirmation of the bull market. We may see a pickup in stock market volatility and returns may be modest over the next year or two, but our leading indicators and our general assessment of the macroeconomic backdrop suggest more gains for stocks may potentially lie ahead.

Angelo Imbrogno is president of Blue Diamond Wealth Management, Inc.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit.

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