quarter saw the S&P 500 drop (20.2%) from its peak on 9/24 to the bottom on
12/26. Though Raymond James Chief
Investment Strategist Jeff Saut had expected some softness in the fall, a
decline of this magnitude, which is usually associated with a recession, had
not been anticipated. As you can see below, my Leading Indicators
are not signaling a recession. They
currently stand at 12.5, with 0 being the best score and 100 the worst. All the negatives come from the housing
industry, which is a volatile component, and which, at the moment, is giving
signs of possibly moving back into positive territory. Prior to each of the 3 previous recessions,
the score was north of 80.
If we don’t see a recession on the horizon, what could possibly have caused the large decline at the end of the last year? The punditry was buzzing with possible causes during the decline, which included:
- The Mueller investigation
- Slowing overseas economic growth
- Hedge fund selling
- Chinese trade tiff and the arrest of Huawei CFO in Canada
- Government shutdown
- Dow Theory Sell Signal
- Federal Reserve policy
- Housing market softness
- Inverted yield curve
I’ll reveal what I believe to be the two best answers next week. In the meantime, email me at firstname.lastname@example.org with your 2 best guesses as to what my answers will be. First 5 correct answers get their choice of a Capitalist Investment hat, or a Harrison Country hat or t-shirt. Unlike Jeopardy!, you won’t be penalized for not posting your answers in the form of a question! Autographs on Harrison Country paraphernalia by request.
 Raymond James Investment Strategy, Being Wrong, Jeff Saut, 9/10/18 https://myrjnet.rjf.com/ResearchandPlanning/InvestmentStrategy/MarketandEconomicCommentary/MarketStrategybyJeffSaut/Pages/default.aspx
 This graph looks a bit different than the one I published in our previous blog, Leading Indicators (http://capitalistinvestment.com/2018/11/leading-indicators/). That graph was updated yearly; this one is quarterly. In addition, I’ve tweaked some of the indicators which gives it slightly different scores.
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