Oct 31, 2016 11:00AM ● Published by Neighbors Magazines
by Angelo R. Imbrogno
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.
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