The constant debates about whether we're in a recession have died down in recent months. But don't assume the risk is over...
We haven't seen unemployment rise. However, just about everything else that happens before a recession is here... including rampant inflation, slowing growth, a stock market crash, and an inverted yield curve.
Now, one more sign tells us a recession is on the way. It has a perfect track record. And it just flashed a warning sign.
Let me explain...
Measuring economic health is no easy task. The economy is big, diverse, and complicated.
Oftentimes, one indicator will say things are fine... while another will say danger and catastrophe are on the way. And at times like these, making sense of it all keeps economists up at night.
The best solution is to look at everything and compile it into something simple enough to act on. That's exactly what The Conference Board does with its Leading Economic Index ("LEI").
This index combines 10 economic indicators. These include manufacturing data, unemployment, building permits, credit conditions, stock prices, and more.
The indicators each tell different stories. But combining them gives us a good look at overall economic health.
In particular, you want to watch the LEI's year-over-year change. Once it falls to negative 1% versus the prior year, a recession is certain... And we recently hit this key level. Take a look...
You can see that this indicator is a strong predictor of a coming (or current) recession. But we have seen a few negative readings that didn't happen ahead of recessions.
A drop below negative 1% changes things, though. Again, that kind of fall has a perfect track record as a recession indicator. Take a look...
We've seen eight other signals since 1969. In three cases, we were already in a recession. And in the other five, it took an average of six months before the recession began – with the longest wait time just less than a year.
Today's signal is another clear sign that the economy is still under pressure. An official recession is almost certain.
Now, we know that stocks only bottom when times are bad. The good news is that stocks have already fallen a lot... And losses set the stage for big gains.
So, a looming recession doesn't mean the end for your investments. Instead, it means a period of strong gains could be on the way. But we need to be patient and wait for the uptrend before buying.
P.S. We expect big gains ahead once the pain ends. But you can still take action to protect your investments until the tide turns. And right now, my colleague Dan Ferris says that's absolutely crucial...
On Wednesday, he's going public with a major warning for investors. He says a dangerous shock is coming for the markets... even worse than the decline we've seen so far. And he's revealing the names of two popular stocks he believes you should sell – right now – to prepare.
So make sure you tune in for the whole story, and watch Dan's free online briefing on Wednesday at 8 p.m. Eastern time... You can RSVP right here.
"Mega-bubble bear markets tend to be long and brutal," Dan Ferris writes. History suggests we could see a lot more pain before the tide turns. And that means the choices you make today will make a huge difference over the next year or more... Read more here: Stocks Are Still in Mega-Bubble Territory.
"These days, even being right can lose you money," Dr. David Eifrig says. It's more important than ever to be selective about your investments. And one proven strategy shows why... Learn more here: How to Boost Your 'Batting Average' in This Inflationary Market.
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Reinsurance Group of America (RGA)... reinsurance
Erie Indemnity (ERIE)... insurance
Cigna (CI)... health insurance
Regeneron Pharmaceuticals (REGN)... pharmaceuticals
Neurocrine Biosciences (NBIX)... pharmaceuticals
Lamb Weston (LW)... frozen potatoes
Hostess Brands (TWNK)... snack cakes
World Wrestling Entertainment (WWE)... pro wrestling
Black Stone Minerals (BSM)... oil and gas
NEW LOWS OF NOTE LAST WEEK
S&P Global (SPGI)... financial analytics
Meta Platforms (META)... Mark Zuckerberg's metaverse
Alibaba (BABA)... Chinese e-commerce platform
Accenture (ACN)... digital consultant
Salesforce (CRM)... customer-management software
Cisco Systems (CSCO)... Internet "plumber"
Nvidia (NVDA)... graphics processing units
Broadcom (AVGO)... semiconductors
ASML (ASML)... semiconductors
Qualcomm (QCOM)... semiconductors
AT&T (T)... telecom
Verizon Communications (VZ)... telecom
Medtronic (MDT)... medical technology
Best Buy (BBY)... electronics retailer
Tyson Foods (TSN)... chicken, beef, and pork
Estée Lauder (EL)... cosmetics
Union Pacific (UNP)... railroads