The aim of this thread will be to create a set of traffic lights to help guide me as to when the next US expansion is likely to commence.
For anyone interested, I created a set of 5 traffic lights in relation to an economic contraction. 5 red lights indicating the end of the expansion phase of the US economic cycle.
https://hotcopper.com.au/threads/leading-indicators-of-an-economic-contraction.4726273/#.XoO6B4k_U0M
Traffic lights:
1. US 10y-3m yield curve
2. Global yield curve
3. US initial claims for unemployment
4. US LEI
5. Euphoria (market sentiment)
All 5 traffic lights turned green in early 2009. 1 and 2 turned red mid 2019, 5 turned orange early 2020, 3 and 4 abruptly turned red a week or so ago. So I now have to work out the trigger points for the lights to all turn green again.
Work in progress. Lets first look at the lights in more detail.
1. US 10y-3m yield curve
2. Global yield curve
This will take some time to calculate again and to produce a graph. WIP.
3. US initial claims for unemployment
End feb 2020
End mar 2020
4. US LEI
Self explanatory, see graphs in technical notes and press release pdfs.
5. Market sentiment
Discussion:
Light 1 - will be interesting this time as the 10y and 3m are both close to zero. 10y is continuing to decline. Some more commentary on that here...
https://www.marketwatch.com/story/w...020-03-31?siteid=bigcharts&dist=bigcharts
Light 2 - WIP
Light 3 - will have to wait for that to settle down a bit over the coming weeks
Light 4 - will observe over coming months. This is obviously the best indicator and has the best track record. Only downside is the time delay of 2 months.
Light 5 - whatever the antonym of euphoria is
Conclusion:
WIP
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