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Recession Predictions

Posted By Barry Ritholtz On March 29, 2005 @ 11:31 am In Economy,Markets | Comments Disabled

Calculated Risk has a nice discussion [1] going on about the difficulty of predicting recessions [2].

One of the more interesting charts is the SPX, pre-1990-91 Recession. If markets truly had forecasting abilities, then one would presume they would have sold off in advance of the recession.

click for larger graphic

1990sp500 [3]

Instead, this chart shows the index rallied right into the start of the contraction. That is hardly predictive. In this instance, the markets acted coincidentally to the recession, instead of predictively. The beginnings and ends of recessions are marked by The National Bureau of Economic Research [4], and are based on quantitative data.

Calculated Risk [5] declares recession forecasting a "mug’s game" — but also agrees to play.  He does not see a recession as imminent. That’s consistent with my own expectations for  a contraction  in 2006/07 time frame.

Other sources have had some success with recession forecasting. As one commentor here noted, ECRI [6] has a good record forecasting economic turns.

Yesterday [7], I linked to Jim Stack (InvesTech Research [8]) recent recession alert [9], which was reproduced at Forbes. I’ve been a subscriber, and I find Stack’s research very interesting, his track record good, and its costs relatively inexpensive.


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/03/recession-predictions/

URLs in this post:

[1] discussion: http://www.haloscan.com/comments/calculatedrisk/111155419339296825/

[2] predicting recessions: http://calculatedrisk.blogspot.com/2005/03/recession-predictions-mugs-game.html

[3] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/1990sp500.jpg

[4] The National Bureau of Economic Research: http://www.ritholtz.com/blog http://www.nber.org/cycles

[5] Calculated Risk: http://calculatedrisk.blogspot.com/

[6] ECRI: http://www.businesscycle.com/

[7] Yesterday: http://bigpicture.typepad.com/comments/2005/03/chart_of_the_we_3.html

[8] InvesTech Research: http://www.investech.com/

[9] recession alert: http://www.forbes.com/2005/03/24/cz_js_0324soapbox_inl_print.html

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