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Pragmatic Capitalism

Practical Views on Money & Finance

10 Macro Indicators that point to no Recession

In a recent research note David Rosenberg of Gluskin Sheff checks in on 10 of his favorite macro recession indicators.  His conclusion – based on this there is a 0% chance of a recession at present:

1.  Inverted yield curve – despite the decline in bond yields, the spread between the 10 year US T-note and the three month T-bill is 244 points.

2.  Morgan Stanley Cyclical Stock Index down more than 10% – the index closed at a record high on Monday and is up 4.9% year to date.

3.  Bond yield rally of at least 135 basis points – the 10 year T-note yield has fallen 56 bps from the recent peak of 3.04% hit at the end of December.

4.   Commodity prices down 5-10% – the CRB spot commodity price index is just off a two year high hit in May and is up 9.3% year to date.

5.  High yield corporate bond spreads widen out 350 bps or more – spreads have continued to narrow and currently sit at almost seven year lows.

6.  ISM below 50 for at least on month – the ISM manufacturing index just ticked up to its highest level so far in 2014 at 55.4 in May.

7.  Initial jobless claims (four week moving average) up 75K – the four week moving average of initial claims fell to 311,500 in the week of May 24th, the lowest level since August 2007.

8.  Relative strength of the S&P Financials down at least 20% – the ratio of S&P financials to the S&P 500 is down 2% year to date and down 6% from the recent peak from last July.

9.  ECRI smoothed index of -5 or worse – the index was +5.3 for the week of May 23rd.

10.  20 point decline in University of Michigan consumer sentiment – the gauge of consumer confidence fell 2.2 points in May from April’s nine month high and is 3.2 points below the post-recession high hit last July.

Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC.Orcam is a financial services firm offering low fee asset management, private advisory, institutional consulting and educational services.Cullen is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.
Cullen Roche

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