The U.S. and International equities markets have just given us yet another great quarter end.
How much longer can this continue?
In spite of the fact that this Bull Market is getting to be very long, it’s important to remember that Bull Markets don’t end just because of time.
One of the indicators that a Bull Market is about to end is that the country is entering into a recession.
What are the signs of a recession?
Sam Stovall, chief investment strategist at investment research firm CFRA, looks at four indicators:
- Every recession since 1960 has been preceded by a year-over-year decline in housing starts, says Stovall. The dips have ranged from a 10% decline to a drop of 37%, and they have averaged 25%. The most recent report on housing starts showed a decline of less than 3%. “So we’re on yellow alert, not red,” says Stovall.
- Consumer sentiment is another signpost. Before a recession kicks in, you’ll typically see an average decline of 9% in the University of Michigan’s monthly sentiment index compared with the previous year, says Stovall. Current reading: up 2.4%.
- A drop over a six-month period in the Conference Board’s Index of Leading Economic Indicators means trouble, too, with declines of 3%, on average, registering ahead of an economic downturn. Latest six-month change: up 3%.
- Finally, when yields on 10-year bonds dip below the yields on one-year notes – known as an inverted yield curve – look out, says Stovall. Ominously, long-term rates recently have been under pressure while the Federal Reserve pushes short-term rates higher. “We’re getting a flatter yield curve, but nowhere near an inversion,” says Stovall. His conclusion: No recession is in sight.
Sometimes people exit a Bull Market too early.
(Source: Kiplinger “When Will the Bull Market End?” by Anne Kates Smith, Senior Editor, June 26, 2017)
Your Resonate advisory team is cautious and continues to follow these important indicators.
If anyone would like to have your current portfolio reviewed or has any questions, we’d welcome a conversation with you.
Barbara A. Culver
CFP®, ChFC®, CLU, AEP®