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>I closely watched the financial news during the last two economic expansions and contractions, and for the last 3 months I’ve seen the same indicators I saw at

>I closely watched the financial news during the last two economic expansions and contractions, and for the last 3 months I’ve seen the same indicators I saw at the top of those two expansions. Anyone know what those signals are? A lot of 'end is nigh' articles I've read have more details. Is it just too much growth in the stock market? Debt? Speculation?

mortehu 8y ago
The unemployment rate is one example: https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE As I understand it, the theory basically goes like this: Low unemployment leads to higher labor costs, which leads to wealthier workers and higher demand for products, which leads to even higher demand for labor. Essentially a positive feedback loop of inflation, which the Fed will stop by increasing interest rates. They may notice too late, or be late deliberately, and thus have to raise interest rates a lot and fast.
benjohnson 8y ago
We do IT support for small businesses - for us slow-pays and dropped projects are the indicators and we're starting to notice both.
aphextron 8y ago
>Anyone know what those signals are? A lot of 'end is nigh' articles I've read have more details. Is it just too much growth in the stock market? Debt? Speculation? Keep an eye on total consumer debt levels, and more importantly debt-to-income. We've already surpassed the absolute peak value of consumer debt load from 2008 [0], but debt-to-income is still ok for now. When that starts to change we're probably in trouble. [0] http://www.businessinsider.com/americas-consumer-debt-keeps-skyrocketing-2018-2 http://www.businessinsider.com/americas-consumer-debt-keeps-...
- jschwartzi 8y ago
  In this case because inflation marches steadily onward I would expect total consumer debt levels to surpass those from 2008 at some point. You need more money now than you did 10 years ago to buy the same things. If the ratio changes, that would seem to be a more reliable indicator because it means people are closer to unsustainable levels of debt.
graedus 8y ago
One indicator people are talking about a lot lately is the yield curve flattening and inverting[0][1]. The yield curve tends to invert shortly before recessions, and is pretty close to doing so now. As always, there are a lot of arguments about whether "this time is different" (i.e. even though this signaled coming recessions in the past, conditions are different now so don't worry). Some people at the Fed recently argued that the traditional ways of looking at yield curve inversion (e.g. the 2s10s[2]) have lost their value as a recession indicator, and that we should instead be looking at various near-term spreads[3][4]. [0] https://www.bloomberg.com/news/articles/2018-04-18/from-citigroup-to-the-fed-curve-inversion-angst-is-intensifying https://www.bloomberg.com/news/articles/2018-04-18/from-citi... [1] https://www.bloomberg.com/news/articles/2018-07-20/trump-blasts-fed-rate-hikes-again-says-strong-dollar-hurts-u-s https://www.bloomberg.com/news/articles/2018-07-20/trump-bla... [2] https://fred.stlouisfed.org/series/T10Y2Y/ https://fred.stlouisfed.org/series/T10Y2Y/ [3] https://wolfstreet.com/2018/07/05/as-the-yield-curve-flattens-threatens-to-invert-the-fed-discards-it-as-recession-indicator/ https://wolfstreet.com/2018/07/05/as-the-yield-curve-flatten... [4] https://www.federalreserve.gov/econres/notes/feds-notes/dont-fear-the-yield-curve-20180628.htm https://www.federalreserve.gov/econres/notes/feds-notes/dont...
mratzloff 8y ago
Unemployment, yield curve, market overvaluation. The stock market is currently 43% more overvalued than just prior to the 2008 financial crisis and 14% more overvalued than the height of the 2000 dotcom bubble.

mortehu 8y ago

The unemployment rate is one example: https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE As I understand it, the theory basically goes like this: Low unemployment leads to higher labor costs, which leads to wealthier workers and higher demand for products, which leads to even higher demand for labor. Essentially a positive feedback loop of inflation, which the Fed will stop by increasing interest rates. They may notice too late, or be late deliberately, and thus have to raise interest rates a lot and fast.

benjohnson 8y ago

We do IT support for small businesses - for us slow-pays and dropped projects are the indicators and we're starting to notice both.

aphextron 8y ago

>Anyone know what those signals are? A lot of 'end is nigh' articles I've read have more details. Is it just too much growth in the stock market? Debt? Speculation? Keep an eye on total consumer debt levels, and more importantly debt-to-income. We've already surpassed the absolute peak value of consumer debt load from 2008 [0], but debt-to-income is still ok for now. When that starts to change we're probably in trouble. [0] http://www.businessinsider.com/americas-consumer-debt-keeps-skyrocketing-2018-2 http://www.businessinsider.com/americas-consumer-debt-keeps-...

jschwartzi 8y ago
In this case because inflation marches steadily onward I would expect total consumer debt levels to surpass those from 2008 at some point. You need more money now than you did 10 years ago to buy the same things. If the ratio changes, that would seem to be a more reliable indicator because it means people are closer to unsustainable levels of debt.

graedus 8y ago

One indicator people are talking about a lot lately is the yield curve flattening and inverting[0][1]. The yield curve tends to invert shortly before recessions, and is pretty close to doing so now. As always, there are a lot of arguments about whether "this time is different" (i.e. even though this signaled coming recessions in the past, conditions are different now so don't worry). Some people at the Fed recently argued that the traditional ways of looking at yield curve inversion (e.g. the 2s10s[2]) have lost their value as a recession indicator, and that we should instead be looking at various near-term spreads[3][4]. [0] https://www.bloomberg.com/news/articles/2018-04-18/from-citigroup-to-the-fed-curve-inversion-angst-is-intensifying https://www.bloomberg.com/news/articles/2018-04-18/from-citi... [1] https://www.bloomberg.com/news/articles/2018-07-20/trump-blasts-fed-rate-hikes-again-says-strong-dollar-hurts-u-s https://www.bloomberg.com/news/articles/2018-07-20/trump-bla... [2] https://fred.stlouisfed.org/series/T10Y2Y/ https://fred.stlouisfed.org/series/T10Y2Y/ [3] https://wolfstreet.com/2018/07/05/as-the-yield-curve-flattens-threatens-to-invert-the-fed-discards-it-as-recession-indicator/ https://wolfstreet.com/2018/07/05/as-the-yield-curve-flatten... [4] https://www.federalreserve.gov/econres/notes/feds-notes/dont-fear-the-yield-curve-20180628.htm https://www.federalreserve.gov/econres/notes/feds-notes/dont...

mratzloff 8y ago

Unemployment, yield curve, market overvaluation. The stock market is currently 43% more overvalued than just prior to the 2008 financial crisis and 14% more overvalued than the height of the 2000 dotcom bubble.