Tuesday, September 22, 2009

History of Leading Indicators: The Recession's Over

Here's a long-term view of the monthly Index of Leading Economic Indicators back to 1972, covering the last six recessions. As the chart shows, each of the last five recessions has ended when the Leading Indicators have increased five months in a row, and history now suggests that the Great Recession is either ending, or is already over.

4 Comments:

At 9/22/2009 8:42 AM, Blogger JimJinNJ said...

I'm looking at that little double dip in 1980-1983. that maybe the head fake pattern that forces out the weaker hands.

 
At 9/22/2009 8:53 AM, Blogger KJ said...

This must be true because all knowing sage Paul Krugman yesterday said as much...of course, the far left dolts who waited for his declaration have just missed one of the greatest stock market increases in history

 
At 9/22/2009 10:15 AM, Anonymous Anonymous said...

Leave it to Jon Daily to report on why any actual recovery is lagging the indicators to such a large degree.

Capital is a coward, but growth only occurs when capital is risked. More than a year later, Obama is STILL talking about the most sweeping and inclusive regulatory overhaul of the financial system since the Great Depression.

Is it any wonder the risk takers are still standing around with their hands in their pockets?

 
At 9/22/2009 12:08 PM, Blogger Steve said...

“LEI, which has increased for five straight months, is heavily weighted to monetary indicators and the stock market. Its predictive value for the stock market has been poor due to over-used monetary stimulus.

"The LEI trended lower from 1997 to 2000 as US stocks bubbled. It declined from 2004 to 2008 as the monetary medication carried a diminishing effect on the real economy."

"Economist Dr. Michael Hudson notes a related pet peeve: We’re in a phase change where the economic relationships, proportions, leads and lags do not operate as they did in the past. So any mathematical model that’s based on this sequence is going to be junk mathematics. The last time we had junk mathematics we had the big financial crises that we’re bailing out today."

Source: Ritholtz - LEI Predictive Value

 

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