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