(1) "The two primary causes of a bear market are either an economic recession or some kind of financial crisis.... Generally, credit conditions deteriorate and you can get a financial panic; and you don't necessarily have to get a recession from that, but the panic in financial markets and credit markets is enough to lead to a bear market. But, traditionally, most bear markets occur because of a recession. So, those are really the two areas that I monitor: number one, what's the probability of a recession on the horizon and then, number two, what is the health of the credit system?"
Indicator: Recession Probability Models (e.g. Logit Probit)
(2) "The credit market, in my opinion, is kind of the boots on the ground in terms of the financial markets. If you think about banks, they have a very keen eye on the economy. They're the ones making loans to businesses, to consumers—they make loans to other banks—and so when they begin to get a little uneasy, they require higher interest rates. This leads to rising interest rates relative to a risk free rate like the treasury and you begin to see those spreads widen just before a recession."
Indicator: Bloomberg US Financial Conditions Index "
(3) In addition to economic activity and overall credit market strength, Puplava also likes to monitor corporate profit margins, which have peaked and signaled trouble before every single recession for the last 50 years. Today, he says, they're at all-time highs. Until corporate profit margins shrink, the credit markets show signs of stress, and the risk of a recession increases, Puplava says the probability of a major peak or bear market crash at this point still remains low.
Indicator: Corporate Profit Margins
Source: http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140515-Major-Correction.php
Indicator: Recession Probability Models (e.g. Logit Probit)
(2) "The credit market, in my opinion, is kind of the boots on the ground in terms of the financial markets. If you think about banks, they have a very keen eye on the economy. They're the ones making loans to businesses, to consumers—they make loans to other banks—and so when they begin to get a little uneasy, they require higher interest rates. This leads to rising interest rates relative to a risk free rate like the treasury and you begin to see those spreads widen just before a recession."
Indicator: Bloomberg US Financial Conditions Index "
(3) In addition to economic activity and overall credit market strength, Puplava also likes to monitor corporate profit margins, which have peaked and signaled trouble before every single recession for the last 50 years. Today, he says, they're at all-time highs. Until corporate profit margins shrink, the credit markets show signs of stress, and the risk of a recession increases, Puplava says the probability of a major peak or bear market crash at this point still remains low.
Indicator: Corporate Profit Margins
Source: http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140515-Major-Correction.php
No comments:
Post a Comment