“The consensus of leading economists has never predicted a recession, while the consensus of leading strategists has never predicted a bear market.
We therefore have a choice between a sensible list of indicators that have been correct on 8 of the last 9 recessions and 9 of the last 9 bear markets, as opposed to a group of pundits that have been wrong all 9 times.” Comstock Partners Market Commentary
The bond market is pretty accurate at predicting recessions (flat or inverted yield curve). My bet is that we’ll have one fairly soon (early 2007). Lots of people hope we’ll have a repeat of the 1995 “soft landing”, but the odds don’t look very good…
An inverted yield curve has predicted 8 out of the last of the last 6 recessions. In other words it is necessary, but not sufficient prior to a recession. The yield curve has inverted several times in the last two years as the Fed has increased short-term rates. Eventually it remain inverted for a sustained period (like right now) and it will be right.
Yield curve inversion is necessary, but not sufficient going into a recession. And that is for cases where the yield curve remains inverted over extended periods of time.
The verbage was intened to point out that these indicators are not perfect.
According to Dean Baker of the CEPR, “Economists almost never forecast recessions. I happened to get a copy of the “Blue Chip” top 50 forecasters projections for 2001, dated Sept. 2000. Not one forecaster in this group projected a recession. In fact, the lowest growth projected by any of them for 2001 was 2.4 percent. Keep in mind, the stock market had already begun to unravel at that point, so it shouldn’t have been too hard to imagine that there would be some economic impact.”
The above is amazing! We had a 2000-2001 recession, and NOT one of these guys realized it, even though there were already IN the recession! It just blows my mind.
A few economists, as well as Bill Fleckenstein and Barry Ritholtz, are predicting recessions, and the signs are there if you look at the leading indicators (see my thread on leading indicators based on Elliott’s work), but which of the mainstream economists are predicting this recession?
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