Well, I’m not going to lie – the ECRI has me utterly confused now. At the market peak they were calling for sustained jobs growth, a continuation in the recovery and a flat stock market (which was approximately 10% higher at the time). None of the above were right. Now they’re saying the probability of a recession is the equivalent of a coin flip. In other words, this “leading index” isn’t really telling us anything we don’t already know. My guess is that the admission of a recession won’t come until well after fact. The creators of the index have gone out of their way to tell readers why the index is misunderstood. While I’d like to give them the benefit of the doubt I am having a hard time seeing how this isn’t merely a coincident indicator.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.