Do You Know When The US could go Into Recession? The Charts Seem to Have a Pretty Solid Idea

in economy •  7 months ago  (edited)

This is not financial or investing advice. I am not responsible for your free-will decisions. If you can't take responsibility for taking risks, then you shouldn't take risks.

I've heard it said over and over by different YouTubers and bloggers that nobody can predict when this US economy is going to collapse. I both agree and disagree. I would correct that statement by saying that nobody can predict long-term when this US economy is going to collapse, but in the short term it is actually not that difficult to observe the collapse coming a few months in advance.

Don't believe me?

The Following chart is of the Industrial Production Average (at the top) from the Federal Reserve's own data, the middle chart is a momentum indicator, and the bottom is a Bollinger Bands %B indicator that follows volatility. As you can see, in the previous two recessions and in 2016, the momentum went into negative territory and the %B did the same. In fact, 2016 on this chart looks an awful lot like the Dot Com bubble bursting.


To be fair, it is too early to know whether January/February 2020 will be like in 2008, or if it's just going to be a small decline like in 2001 and 2016.

Here is a zoomed out chart to show just how well this chart setup (which I've dubbed Big Momma) can predict a coming recession. This is of course the Federal Reserves data, so you know that they're watching this as well, and if you were in their shoes you would realize it's all a guessing game as to how much to lower interest rates, and how much money to print. Hence why they've been taking huge baby steps to keep behind the trend instead of leading it.


What this means, to me at least, is that we've got maybe 3 or 4 months tops before we'll know whether it's bad, or a complete disaster. That is of course if you only go by this chart. There are many other economic indicators that are far more bearish and forward looking, like the repo markets and the extreme liquidity shortage US banks are experiencing, or the inverted yield curves.

Of course, banks love to gussy up their words, as liquidity shortage really just means they are low on cash and in a tight spot. Saying it like that though would make the public panic and a bank run would be attempted by most people as they tried to hoard physical cash. Calling it a liquidity shortage makes the whole thing sound like business is booming and the demand is high, and the money factory needs to increase production to meet the demand.

If you look at the equity market indices, you might be seeing odd coincidences pointing to November 2020 as a deciding date for whether the market crashes or not. Given that the US is holding a presidential election in November 2020, I'd say it's hardly a coincidence that trading algorithms have this date included in the equations.


Hopefully this post was informative, and helps you in your own life to make the right decisions. For now its smart to be prepared for a recession, and based on the data it's apparent that the Federal Reserve are not fortune tellers, and the decisions they make are always a step or two behind the data, and the data is always a step behind the smart money.

Be smart. Be safe. Really though, just be a good person, your future self will thank you for it.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

I think we all know it's just a matter of time, it's not knowing the when. Moving toward the election I have spoken to my kids they may have to start to prepare depending upon who it looks like may win. I think a Sanders or Warren presidency is going to cause as huge uncertainty in a market that can't handle uncertainty right now and be prepared to start stocking up on basics to get through the first year until things stabilize.

  ·  7 months ago (edited)

Yeah, it'll likely be warren, and She'll be spending 4 years trying to clean up the mess that Trump is creating. It's unfathomable to me how people can't see the damage his policies are causing long term. Even Fox news is in a corner now and can't defend the guy on a number of levels, even though doing so benefits them in the short term. What goes up, must come down, and the equity market is so ballooned about reality that anyone believing theres fair value or price discovery is going to be in for a surprise someday. The huge tax cuts were a short term boost, and anyone who didn't take advantage in the US that could, well it's too late for them now as the inflationary impact is going to hit soon and a lot of things are going to go up in price, like food etc. In a way I hope Trump wins again so he can be exposed and have to face the mess he's created.

I am an avid Trump fan. lol. An economy doesn't get wrecked by one man's actions in less than three years, it's an accumulations of factors over years. Yeah, he's not responsible for that which has been building up not just here but globally for years now.

Yes his trade war probably isn't helping but at what point would it have ever helped by getting it done? A quote from a farmer when asked about the trade war and the effect it was having said it's hurting him financially but this should have been taken care of decades ago and he stands behind Americans who want it done and backs the president in that endeavor.

We've let politicians run rough shot over us for years, them and their corrupt corporation cronies selling us out to the cheapest bidder. That's what Trump is trying to point out, families using politics to enrich themselves not caring about who it hurts in the long run as long as it doesn't affect them.

Trump probably isn't the perfect pick in a movement of people wanting change but he was willing to step up to the plate. Fifty three thousand people showed up for his rally in TX the other day. If you ever attended one it's like nothing you've ever seen before, it's unreal so many people being brought together to back their movement and support for a president willing to make change. That's the part the media doesn't want to tell you about, the will of the people behind this president wanting change.

I am not blind and I see prices rising. Like I said I don't attribute that solely on the back of this president but like the farmer said if I have to take a hit on behalf of the American people so be it.

your support a sociopath. just saying. Maybe you don't see it now, but eventually you will and it will be devastating to your world view.

Sociopaths are people willing to sit while people are living in tents on the streets growing in numbers everyday. Somewhere, somehow people got to try and force a change. Like I said he may not be the perfect pick but none the less he wasn't a typical politician and people, at this point, have grown tired enough of what's happening to start a movement.

After George W Bush I don't think anything could get any worse for my world view on how these people operate. What he done will forever have changed the course of history for the worse. I don't see Trump coming anywhere close to that. If the global economy collapse, like I said that came from years of accumulative damage.

Everyone's entitled to their viewpoints though, we all look at life through a different lens in one way or another.