Macroeconomic Indicators for Recession Prediction: The Professional’s Tools
How to predict the coming recession and when to exit trades? This is one of the most challenging questions to which even the best economists often do not have answers. However, together with macroeconomic and advanced quantitative and technical analysis, it is possible to find places when it is appropriate to sharpen attention, sell part of the portfolio at a profit, or temporarily withdraw from the market and wait for a recession and buy if the price returns to the same level where we exited or buy at a discount (although averaging down is not recommended by most traders, the situation is different with indices and ETFs such as the S&P500, where it is almost certain that the entire index should never go bankrupt and fall, for example, by 80%, which can happen with individual shares, but with a basket of all the best USA / World actions should not happen – there would have to be a truly extreme disaster such as a huge pandemic, a meteorite or a world war, although even during the 2nd world war the indices did not make such a collapse.
That it is impossible to predict a recession is a questionable claim (although no one knows the future, not even us), see our article titled how we managed to predict the last 7 recessions / financial crises since 1970 when we have some data available. Moreover, it is just one of the simplest methods and models/indicators and systems we have at our disposal in our macroeconomic laboratory.
We will talk about the key economic indicators to watch and which could predict an approaching recession or correction – about the standard and well-known ones used by economists and regular hedge funds, but also about the less well-known ones. We will talk about how data from the economy (and especially what data) influence and to a certain extent can predict developments on the stock market, and conversely how the stock market can influence basic economic data through a reflexive mechanism. How and in what way can data from bonds, data from managers of large companies or data from statistical offices be used.
The story continues… READ MORE:
The entire article is available to members of our club. Join our private membership area:
Private membership club / Area with premium articles (Click here)
