Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Friday Stock Market CRASH Following Israel Attack on Iranian Nuclear Facilities - 19th Apr 24
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The False Economic and Stock Market Recoveries

Economics / Recession 2008 - 2010 Jun 03, 2009 - 01:29 PM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleClaus Vogt writes: The stock market has been jumping for joy over the last few days. Yet I can’t see exactly what investors are cheering about. Heck, two of America’s most prominent companies, GM and Chrysler, just declared bankruptcy!

It seems as though everyone is so wrapped up in the sighting of supposed “green shoots” that they’re willing to ignore even the most calamitous events.

Yet I see a very strong reason to believe that the U.S. is not yet on a solid road to recovery, despite what some of the data might say. That’s because …

Major Recessions in the Past Have Been Interrupted by Small Upticks in Growth

The Conference Board’s Index of Leading Economic Indicators (LEI) is one of the best tools to forecast recessions. As such it plays a major role in my macroeconomic analysis tool box. It has called every recession since 1960, the current one included. And I also use it to decide just when a given recession might finally be coming to an end.

So what is the LEI saying now?

In April, the LEI’s year-over-year change was minus 3 percent. That’s definitely better than March and February when the reading was minus 3.9 percent after downward revisions.

And even though a negative reading still clearly signals “recession,” many hope that the low point of this indicator and of the recession might be behind us.

But take a look at the following chart of the LEI for 1960-2009 …

GPO Bar Chart

Source: Bloomberg

With just a little hook to the upside you can see that it’s very early in the game of predicting the next recovery. If this is truly the beginning of a recovery, that little hook should very soon be followed by a sharp rise and possibly positive readings.

Moreover, do you see that other little hook at the beginning of 2007? That was when most economists and central bankers were chatting about a soft landing and just a minor stall in growth!

You see, false recovery signals are nothing new …

In 1980-82, the LEI even experienced a real whipsaw as did the economy. Shortly after the all-clear signal was given, the indicator turned down again as did the recession. And a much more severe second part of that double-dip recession took place.

And Even If the LEI Has Hit a Cyclical Low, That Doesn’t Mean the Recession Is Over!

History shows that the time between the LEI’s low and the beginning of the economic recovery can be as much as four quarters apart!

Wall Street doesn't want you to be patient. They want you to act: To buy, buy, buy.
Wall Street doesn’t want you to be patient. They want you to act: To buy, buy, buy.

If the economy were to suffer another three or four quarters of recession, a host of additional problems, such as skyrocketing unemployment, could emerge. Some even jeopardizing the very recovery everybody is hoping for.

Patience is imperative for long-term, successful investors.

However, Wall Street does not want you to be patient. They want you to act: To buy, buy, buy. Last year demonstrated how bad this advice can be.

So for now, I strongly suggest you consider staying the bearish course and expecting a return of the bear market.

Best wishes,


This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in