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LOOK REPORT #38: The US GDP Fibonacci-Type Cycles This study considers the “Fibonacci-Type” cycles in the quarterly changes of the US GDP Index from 1948 through 2006Q3. There is not a previous Qwik Look Report on www.financialsense.com for the US GDP Index predicting this dataset. The dataset for the Quarterly GDP comes from Mr. John Williams of Shadow Government Statistics (www.shadowstats.com) and we looked at the transient cycles (not the GDP slope) present in the dataset (the slope of the GDP depends upon how you define the terms within the GDP). It appears the Government statistics have been changed over the decades to keep the GDP slope fairly constant at 2.5% to 3.0% slope (make whatever hedonic adjustments it takes to make the slope come out whatever you wish to keep Social Security payments within inflation parameters). There are several alternate series from this subscription website which much closer match the reality of our financial world (based on Neural Net correlations) than the official Government statistics over the past ten+ years including M3. Chart 1 show the actual four-year cycle in the GDP from 1949 thru 1979. There was a major cycle interrupt appearing in 1962Q4 probably as a consequence of the filter subsequently fitting the JFK assassination that occurred in the “Presidential Cycle” in Nov 1963. The cycle did not totally correct its phase and amplitude until 1972. This cycle was significant in this timeframe with“peak to trough” amplitude equal to almost 3% of the GDP. However, there are large six and ten year cycles which are “out of phase” with this cycle and tend to mitigate its effects. The danger comes when the ten year cycle in the GDP (which maybe a housing/bond cycle) starts going down with the six and four year cycles. What tends to be surprising is the magnitude of this four-year cycle in the GDP and how it changes depending upon the relationship between business and politics. Chart 2 shows the actual four-year cycle in the GDP from 1980 thru 2006Q3. It shows the four year cycle has been decaying in amplitude since 1984 until it reached its current “steady-state” amplitude in 1996 during the Clinton Administration. However, it appears to be growing again under the Bush Administration. The decay of the four-year cycle from 1984 is also present in the NYSe Composite Index as well as the S&P 500 Index, etc. Chart 3 presents the actual ten-year cycle in the GDP from 1980 (and it has been present form 1948 in this dataset). It is also a very significant “business/political” cycle and has a high correlation with recessions, conflicts and financial crisis (i.e., worldwide) after it forms a top and turns downward (and sooner or later it is joined with the four and six year cycle turning down). Chart 4 predicts the trajectory of the ten-year cycle from its top forming in 2007Q2 thru 2012. The ten-year cycle is expected to reach its maximum downward acceleration in 2010Q2/Q3 which coincidently is the timeframe we currently predict the USD starts a major decline (and problems in other world indices). The ten-year cycle would bottom in 2012Q4 which coincides with the end of the Mayan Calendar (whatever that means – it all happens Dec 21, 2012). For the markets it could mark the end of a major worldwide recession (housing/wages) and a huge impact in world markets from the Baby Boomers retiring. Chart 5 predicts the coming changes in the GDP from 2007 thru 2012. It contains a surprising result which has been triple-checked. The US GDP is expected to start a significant decline in 2008Q4 which continues into a double bottom 2011Q3. The result is a consequence of all the major cycles in the GDP coming together (4, 6, 10 year, etc) and heading downward. It may signal a coming loss of buying power for the US consumer to carry the world economy into 2009 and a major change in global imbalances. It also may imply the US housing market may remain with serious problems until the Baby Boomers (and their collective 401(K) funds) can bail this baby out. Chart 6 shows a comparison of the Fibonacci-type filters versus the actual changes in the GDP. The filters were tuned to under predict the magnitude of the actual changes in the GDP but the cycles are a good fit to the current transient changes in the US GDP.
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INFORMATION DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments. |
