Timing and predicting recessions is an important task, not only for traders looking to make a profit but also for policymakers looking to correctly time stimulus measures.
Not many people are against government stimulus measures during difficult times, but the problem is that recessions are difficult to spot in real-time, and policymakers often provide help too late and then offer support for too long.
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DISCLAIMER: This video does not provide investment or economic advice and is not professional advice (legal, accounting, tax). The owner of this content is not an investment advisor. Any securities, trading, or market discussion is incidental and solely for entertainment. Nothing herein shall constitute a recommendation, investment advice, or an opinion on suitability. The information in this video is provided as of its initial release date. The owner of this video expressly disclaims all representations or warranties of accuracy. The owner of this video claims all intellectual property rights, including copyrights, of and related to this video….(read more)
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How To Predict A Recession
A recession is a word that brings fear and uncertainty to individuals and economies alike. It is a significant decline in economic activity that affects various sectors and triggers consequences such as job losses, reduced incomes, and slower business growth. While recessions are an inevitable part of the economic cycle, being able to predict their occurrence can be advantageous for individuals and businesses alike.
Predicting a recession accurately can be challenging, as it involves analyzing multiple factors and indicators. However, by understanding and observing certain key signals, one can develop a good sense of when a recession is likely to occur. Here are some ways to predict a recession:
1. Monitor GDP Growth: One of the fundamental indicators of an economic downturn is a significant decline in Gross Domestic Product (GDP) growth. GDP reflects the total value of goods and services produced within a country in a given timeframe. A steep decline in GDP growth for two consecutive quarters, usually expressed as a negative percentage, could signal the onset of a recession.
2. Keep an Eye on Leading Indicators: Leading indicators are key economic factors that demonstrate early signs of where the economy is heading. These indicators help investors and economists predict future trends. Examples of leading indicators include the stock market performance, consumer confidence, housing starts, and business inventories. A decrease in stock market indices, declining consumer confidence, or a slowdown in housing starts can be indicative of an impending recession.
3. Analyze the Yield Curve: The yield curve is a graphical representation of the interest rates on debt for a range of maturity dates. Typically, longer-term debts yield higher interest rates than short-term debts. However, when the yield curve inverts, meaning short-term debts yield higher interest rates than long-term debts, it is often seen as a warning sign of an economic downturn. Historically, an inverted yield curve has preceded almost every recession.
4. Follow Unemployment Rates: Employment figures provide crucial information about the overall health of an economy. When unemployment rates rise, it becomes an indication of economic instability. Elevated or increasing unemployment rates can result in reduced consumer spending and lower demand for goods and services, ultimately leading to a recession.
5. Review Consumer Spending Patterns: Consumer spending is a significant driver of economic growth, and any significant decrease can be an early warning sign of a recession. By monitoring consumer spending patterns, economists can gauge consumer confidence and determine whether people are becoming more cautious with their money.
6. Pay Attention to Corporate Earnings: Financial markets are typically forward-looking, and stock prices often reflect future expectations. A significant decline in corporate earnings and profit margins, particularly for large, influential companies, can be a precursor to an economic downturn. Investors closely analyze earnings reports and listen to company forecasts to identify potential recessionary signals.
It is essential to note that predicting a recession is not an exact science. Economic conditions can be complex and influenced by various factors such as government policies, international trade, and unforeseen events. Therefore, it is advisable to consider multiple indicators and consult with professional economists or financial advisors for a comprehensive analysis.
While it may be challenging to accurately predict a recession, understanding the signs and indicators can provide individuals and businesses with valuable insights. By staying informed about the health of the economy and employing careful analysis, one can better prepare for potential economic downturns, make informed investment decisions, and develop strategies for mitigating the impact of a recession.
Understanding personal finances and investing will most likely lead to greater financial independence. By being knowledgeable about money and investing, individuals can make informed decisions about how to save, spend, and invest their money. A trader made over $350k in this recession influenced market.
I just discovered your channel via YouTube’s algorithm and your content is amazing! You are a true asset to this platform!
forgetting to mention that unemployment is resilient and won't seem to rise no matter how high the interest rate.
You would benefit from understanding the concept of malinvestment in the Austrian business cycle of L. von Mises and F. von Hayek.
I'm impressed with your indicators and have subscribed for more good stuff/updates.
This is very interesting and funnily enough seem to highlight the absurdity of the Fed's action over the last couple of months.
Does your analysis only goes back to the 1970s? Seems like a small sample size
wow….. thank you
there are two forces that can print money, Yellen and the Fed, and Yellen had been printing a lot of money, thus the March -April Bull market, which will end only when Yellen stops printing money for Biden's friends.
This video is awesome. People probably don’t realize how concerning this is
Data Data Data…always make decisions based on DATA…luv it!
So a recession is going to happen any day now? Are home prices going to decline by 40%?
Layoffs have already started in almost all major buildings focused structural engineering firms in my west coast city. Multiple friends getting laid off or receiving no raises this year. Seems to align with what you’re saying so far as construction being the canary in the coal mine for a recession. But we will see!
you could argue that the fed has never been tight but is only reducing how loose its policy has been. The real rate of interest has been negative for almost two years. Only recently has the real rate approached zero.
Also signal two being 100% accurate; reminds me of the old saying " economists have predicted 9 out of the last 5 recessions"
good video though. keep up the good work. thanks.
We got these signal indicators. We also see news of banking crisis, inflation data, layoffs, commercial real estate, war, China Taiwan conflict, brics de-dollarization, OPEC oil cuts, etc. I don't know why government is saying everything is fine and I don't understand why market is going up recently. Nothing makes any sense. Mass money was injected during covid. Mass money got injected again during the first svb crisis. We really all believe that all these money injection has no effect on the economy? A tiny drop during 2021 and 2022 was enough to fix and justify the market to reach a new ATH?
Not to be a debbie downer but, OMG LOL… This video is complete gold BTW, keep up the great work please
no the FED cannot start easing with unemployment at cycle and multidecade lows. This is terrible advice when sticky inflation is at 6%
Eric, nothing in this process and empirical analysis takes into account excess savings. It should
Where do you get all these charts?
I trust the fed and I am heavily invested in S&P500 based ETFs
Stock prices are in a bear market, and there has never been a bad bear market to buy. Let's check in 3 years and see where we are at!
2 .2 percent growth after the GFC. It used to be higher about 3.2percent gdp growth
No, they're not! The US has been in a recession for some time now. The MSM masters would like everyone to think the recession ended when the dementia Biden puppet masters change the definition of recession. Unfortunately, it's not that easy to end a recession !
Love your videos. I don't understand why people are continuing to buy stocks. Not looking ahead at all
None of your predictions have been correct and you make videos trying to justify your false predictions. Why should we trust this video that YOU know how to predict a recession?
Ahh, just wait till the next jobs report on May 5th
The stimulus means that one stimulates private ownership, private profits and private accrual of wealth. It's an another story how a different type of economy, namely state capitalism, is stimulated. Public ownership etc. are morally right when it comes to increasing production and wealth of society in the 2020s and 2030s. Continuing stimulus as in the USA is morally wrong and leads to the wedge between the rich and the poor is not the way to run a society in principle. It means the end of capitalism.
Do people see recessions as good or bad ? As a value investor, I see them as good but I’m curious what other people think.
It's all a prediction
Thanks for sharing your knowledge!
Short and sharp. You have been told.
This so called "recession" has been coming for months and months, where is it? We've already been in one for the last 6 months, the Fed just won't acknowledge it. So now that you realize we're already in a recession when will we get out of it? End of 2023, early 2024. We've already entered the doom and gloom tunnel, stop letting these people tell you it's still coming when we're already there, we'll get to the light at the end of the tunnel soon enough.
This video and the knowledge you presented is excellent!
Desperate, laid off white collar workers considering a job at Home Depot to survive might indicate we’re currently in a recession.
But that’s just my 2cents.
So, 45% of the time, "recession triggers" do not accurately predict a recession? Time index 3:15
Sell in
latemay and go away. Amazing as always. tyThe problem is that the Fed has their hands tied with inflation. There will be no easy way out of this economic dilemma.