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iM’s Business Cycle Index Warns A Looming Recession – Update 1/15/2023


Recession Warning Green Road Sign Over Dramatic Clouds and Sky.

Feverpitched

The BCI at 262.0 is above last week’s level raising BCIp from 18.2 to 27.6(see Figure 1, magenta curve) which from past performance warns of a possible recession to be at the earliest 14 weeks away but not later than

iM Business Cycle Index

Figure 1 plots BCIp, BCI, BCIg and the S&P 500 together with the thresholds (red lines) that need to be crossed to be able to call a recession. Here we note that BCIp has crossed the 25 threshold firmly to the downside. Historic data of the past recession shows that at this value, the economy never recovered to avoid a recession. (iMarketSignals)

iM Business Cycle Index

Figure 2 plots the BCIw tracks to the past recession together with the current value of BCIw with its endpoint on the best fit average value of the past recessions. (iMarketSignals)

Table 1: Loss avoidance in SPY when exiting on BCIg recession warning.

Note

1

2

3

4

5

6

7

8

Recession

Peak

Signal

Trough

(P-T)/P

(S-T)/S

(P-T)

(S-T)

(S-T)/(P-T)

Jan-70

106.16

93.24

69.29

36.1%

25.7%

36.87

23.95

65.0%

Dec-73

120.24

103.36

62.28

48.2%

39.7%

57.96

41.08

70.9%

Feb-80

115.2

100.3

98.22

17.1%

2.1%

16.98

2.08

12.2%

Aug-81

140.52

128.64

102.42

27.1%

20.5%

38.1

26.22

68.8%

Aug-90

368.95

332.92

295.46

19.9%

11.3%

73.49

37.46

51.0%

Apr-01

1520.77

1326.82

965.8

36.8%

27.2%

554.97

361.02

65.1%

Jan-08

1565.15

1508.44

676.53

56.8%

55.2%

888.62

831.91

93.6%

Average all recessions

34.6%

25.9%

60.9%

Column Notes:

  1. S&P 500 peak during 1-yr period before recession
  2. S&P 500 at iM-BClg signal date
  3. S&P 500 trough during recession
  4. %-Loss from Peak to Trough
  5. %-Loss avoided from Signal to Trough
  6. Absolute loss from Peak to Trough
  7. Absolute loss from Signal to Trough avoided
  8. % of loss from Peak to Trough avoided

iM Business Cycle Index

iMarketSignals

iM Business Cycle Index

iMarketSignals



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