Cullen Roche passes along David Rosenberg’s list of 10 possible recession indicators.
Rosenberg concludes that not one of the indicators is pointing to a recession, so there’s a zero per cent chance of recession.
Here are the indicators. Note that the first part of each indicator is what we’d need to see to be worried, and the second half is the much less worrisome actual data.
1. Inverted yield curve — despite the decline in bond yields, the spread between the 10 year US T-note and the three month T-bill is 244 points.
2. Morgan Stanley Cyclical Stock Index down more than 10% — the index closed at a record high on Monday and is up 4.9% year to date.
3. Bond yield rally of at least 135 basis points — the 10 year T-note yield has fallen 56 bps from the recent peak of 3.04% hit at the end of December.
4. Commodity prices down 5-10% — the CRB spot commodity price index is just off a two year high hit in May and is up 9.3% year to date.
5. High yield corporate bond spreads widen out 350 bps or more — spreads have continued to narrow and currently sit at almost seven year lows.
6. ISM below 50 for at least on month — the ISM manufacturing index just ticked up to its highest level so far in 2014 at 55.4 in May.
7. Initial jobless claims (four week moving average) up 75K — the four week moving average of initial claims fell to 311,500 in the week of May 24th, the lowest level since August 2007.
8. Relative strength of the S&P Financials down at least 20% — the ratio of S&P financials to the S&P 500 is down 2% year to date and down 6% from the recent peak from last July.
9. ECRI smoothed index of -5 or worse — the index was +5.3 for the week of May 23rd.
10. 20 point decline in University of Michigan consumer sentiment — the gauge of consumer confidence fell 2.2 points in May from April’s nine month high and is 3.2 points below the post-recession high hit last July.