Anyone ever look at these indicators?
Looks like a wiggly line to me.Also of note in the current situation: we just hit a peak in this indicator that is the second highest in 30+ years, and we've had a multiweek transition downward. Thus if one followed this indicator and believed in it, this would indicate that near term returns on equities should decline through this downward term and turn into losses once the indicator drops below zero.
Any thoughts?
My favorite indicator is the relationship between the projected forward earnings yield (E/P ratio) of the S&P 500, in comparison to the yield on 10 year Treasury notes.
This one has been touted as a successful market timing indicator by none other than a fed economist:
Ted, at what point do you take action? Do you modify your allocation annually and use this chart to determine which way to move? And how far do you stray from your target allocation?My favorite indicator is the relationship between the projected forward earnings yield (E/P ratio) of the S&P 500, in comparison to the yield on 10 year Treasury notes.
TH, to return to ECRI- it appears that the current downturn was equaled several times during the period 1991 to 2000, but then turned around, and either stayed above 0, or only penetrated slightly. These downturns did not precede recessions. Likewise, you cite the height of the recent peak as being the second highest in 30 years. While this is true, the very highest peak in early 1982 was not followed by a recession, as the trough in mid 1983 saw us on the way to recovery from the Volker induced interest rate squeeze.
This appears to be very interesting data, but to me at least the current position of the indicator is indeterminate as to future movement in the stock market or in the economy.
Is there a chart on the website that shows the indicator overlaid with the Dow or S&P or other index?
Mikey
So Ted, does your tweaking of the asset allocation based on indicators give you any positive results vs maintaining a 60/40 (either way) or a 50/50?