Watch Out For The Smoothed U.S. Recession Probabilities Index!

** Please note that any information shared in this public blog is NOT to be regarded as an advice or a recommendation, it is meant for EDUCATIONAL AND INFORMATION PURPOSES only and it does not constitute an investment advice, an offer or solicitation to purchase or sell the investment asset classes mentioned. **

There are many indicators to help us spot the start of the recessions. Apart from the 10Year – 3Month Yield Spread which has a 100% accuracy rate for the last 8 recessions, another indicator that I look at is the Smoothed U.S. Recession Probabilities Index by St. Louis Fed. The line in the sand is when it goes above 10 and it only has 1 bad call in the last 50 years in 1979. Not too bad for 87.5% accuracy rate.

Based on December 2022 data, it was 4.96, not above 10 yet. But according to the brain behind this Index, they said that 3 consecutive months above 0.8 has been a reliable signal to kick off a new recession. We already have 3 consecutive months of October, November and December above 0.8! Let’s observe this index further to see whether it will go above 10. Beware, the chance of U.S. heading into a recession is getting higher with each passing day!

** Please note that any information shared in this public blog is NOT to be regarded as an advice or a recommendation, it is meant for EDUCATIONAL AND INFORMATION PURPOSES only and it does not constitute an investment advice, an offer or solicitation to purchase or sell the investment asset classes mentioned. **