The biggest problem with economic forecasting for the purposes of investing is that it is difficult to quantify it specifically enough to fit it into any kind of a timing model for investing. If I could do it I would, I just have never been able to figure out a way of doing it.
It is so macro in nature and most of my investing/trading is in much shorter time frames. Fundamentals do drive markets but in shorter time horizons markets can go their own way. Markets are not necessarily efficient on a day to day basis, but are efficient over years of time. I do think at the very least an economic slowdown is on the horizon, how bad it will get I do not know.
Here is a possible scenario that could play out. A dip into the fall in stock prices, followed by a decent rally upward. Mid next year the economics take over and we get a pretty good selloff that ties into the slowdown most of us see coming. Under this scenario the markets would diverge from the larger picture fundamentally deteriorating situation but just for a 3 to 6 month timeframe. After that the macro effect takes over and we roll over.
I have no idea if this will happen, it is just the price action my models tell me to look for. The rest is just my opinion of what would explain it and my opinion is not better than anyone else’s.
