E Here's Another Recession Indicator To Add To Your Collection

Courtesy: Chicago Fed

This indicator just came in at a -0.02 reading, clearly below economist expectations of a +0.1. This now marks the seventh consecutive month in which this index has come in negative. And, every prior streak of seven or more months of negative readings in the index has coincided with a recession.

Sure, market bulls can look at those two indicators and say, "It's different this time." Anyone who invested through 2000 and 2008 knows that those are famous last words, usually spoken at market tops by hapless retail investors. I'm not advising reallocating to an all-cash position, but as always -- and especially now -- caution is most definitely advised.

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Disclosure: David Moadel is not a licensed or registered investment advisor, and has no position in any securities listed herein.

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Moon Kil Woong 1 year ago Contributor's comment

The economic slowing is the economy adjusting after the last stimulus. The issue is if the economy falls further or falls faster than what is normal. So far neither has happened and the new budget seems to be running up government spending despite the higher deficit. This is not good in the long run but helps buoy the economy for now.

The main issue is the fact all these efforts have failed to raise growth much more than it has. One argument is Federal Reserve tightening. However, that is another thing that has been way too low for way too long. This is the only positive long term thing going on recently. The Federal Reserve needs to get rates back to normal to avert an eventual downturn from becoming a bad downturn. Likewise they should have reversed QE when the economy was no longer in recession years ago.

David Moadel 1 year ago Author's comment

Thank you for the comment, Moon Kil Woong; I expect the Fed to continue its current and rather unfortunate policy of flooding the market with liquidity for the foreseeable future.

Moon Kil Woong 1 year ago Contributor's comment

You may be right. I certainly wouldn't bet on the Fed having a stiff upper lip these days against political pressure.