Is the US Economy Doing Just Fine?

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With or without Trump's help, the US economy is doing just fine. What does that mean for the US stock market?

Consider Urban Carmel: “No Reason to Suspect Bull Market Has Ended”

"The reality is that bull markets end when economic expansions end and the balance of the evidence suggests that the economy continues to expand...on something of the order of 2-3% real per annum and that's true regardless of what data you are looking at. So...the fundamental view looks pretty good and there's no real reason to suspect from a fundamental standpoint that the bull market has ended."

Carmel is one of the lead writers at The Fat Pitch and, according to Business Insider, one of the most important people to follow in finance.

Speaking on our podcast last week, Carmel also said that the balance of the data suggests we aren't likely to see a recession in the US until late 2018 at the earliest.

He gave a variety of reasons and data points for why he thought that was the case but let's take a look at just one—the Conference Board's Leading Economic Index (CBLEI), a composte of 10 different leading indicators—to see whether it lines up with what Carmel said on our show.

conference board lei

Currently, the CBLEI is growing at 3.9% year-over-year and has reliably forecasted every recession since 1965 by dipping into the red zone, i.e. contracting, 6.5 months on average beforehand.

That said, we aren't in the red zone. Most of the leading economic data it tracks is still well into positive territory, which is why it's positive. Just for the sake of the argument however, let's assume that the CBLEI has peaked at 3.9% and it's all downhill from here. How long before a recession in that case, which is when most bear markets tend to occur?

conference board 1965-2017

Looking at the chart above, the soonest we could expect a US recession from current levels is 4 months. The longest is 26 months and the average is around 13 months, or just over a year, aligning with Carmel's outlook and a number of other strategists on our program.

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