Quick update on what the Recession Probability Indicator is telling us moving into the Fall.
The most recent reading (for May 2015) is STABLE with an RPI score of 12 (Below 20 generally favorable, above 20 not so much). The RPI runs on about a 2 month delay due to the Fed’s data release schedule.
To see an illustration of the RPI at work, CLICK HERE and scroll down to the updated table. If you haven’t seen it, take a look at the table. You will be amazed.
For those interested, I’ve also included an excerpt from the American Institute for Economic Research below which provides their view on the Economy, Inflation, Policy Issues, and Investing. Interesting and detailed perspective on where we are, which at this point largely coincides with my view.
You can find the full paper by CLICKING HERE.
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Chief Market Strategist
ACI Wealth Advisors, LLC.
While the latest data confirmed our reading at the start of the year that economic
weakness was temporary, and despite accelerating growth in the second quarter, the
more complete and detailed information released last month show that the recovery
since 2012 has been slower than previously reported. Today’s GDP value is almost one
percentage point lower than earlier estimates led us to believe. This means the current
business-cycle expansion, whether measured by output or employment growth, has
been the slowest in U.S. postwar history.
Strong CPI growth in June underlined AIER’s analysis last month pointing to rising
inflationary pressures. The latest scorecard shows that 17 out of 23 indicators support
rising inflationary pressure, compared with 15 in our previous report, indicating a
higher likelihood of future price increases. Anticipated policy firming on interest rates
may moderate rising inflationary pressures.
Fed policy makers did not provide any new signals on the timing of an increase in
short-term interest rates following their July meeting. and despite the weaknesses
highlighted in the revised report, the Fed continues to indicate that its policy remains
on track for a liftoff this year.
With still-modest growth and inflation, bond yields remain very low. However, a slowly
improving U.S. economy and declining unemployment may support the Fed’s first rate
hike in almost a decade. That, in turn, may pressure bond yields higher, but the question
of how high yields may rise remains open.
Weak global growth and a strong dollar have sent most commodity prices tumbling to
multi-year lows. Add to that a price war in crude oil and the decline in demand for gold
as a haven and the environment for commodities remains unfavorable.
Equities around the world have done reasonably well this year—valuations are rising in
many markets. Critical to continued price gains will be better economic growth helping
drive future earnings
If you’d like to read the full summary just CLICK HERE.
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