Before You Write Off Lakshman Achuthan's Recession Call, There's One Tiny Stat That You Should See

Lakshman Achuthan

So the market has been surging, and Wall Street sell-siders have been cranking up their GDP estimates.

Obviously people are talking about Lakshman Achuthan of ECRI, who famously called for a recession at the end of September, and said it was guaranteed.

Did he blow it? Is his sterling reputation in trouble?

We won’t offer a verdict, but before you write him off, consider this from Jon Markman at MarketWatch:

Consider that the last two times Achuthan leveraged his cycle research to make an out-of-consensus recession call were March 2001 and March 2008. After the first, the S&P 500 rose 14% to its 10-month average in May before falling 32% over the next 16 months. After the second, the S&P 500 rose 9.8% to its 10-month average in May before collapsing by 42% over the next nine months.

The reason for the lag is that ECRI’s calls come early. That’s why they are called “forecasts” rather than “observations.” If the past two examples provide any guidance, the current rally has a shot at rising to the 1,230 to 1,280 level of the S&P 500 before turning tail. On Wenesday, the index closed at 1,209 after falling by 1.3%.

So he’s not only not budging, the current scenario is playing identically to previous calls. Just saying.

(Via @firstadopter)

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