Our Recession Watch Dashboard is showing an overall low risk of recession starting within the next year. For more details on any of the components of this dashboard, please see the links embedded within the graphic (marked with a “+” symbol).
+ The Over Index
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
To complete the Over Index, LPL Research measures trends in three broad economic drivers: spending, borrowing, and confidence. For each of these three drivers, we found four diverse components that reflect the economic activity of that subindex from a dierent angle. The Over Index takes each of the subcomponents and uses a sophisticated statistical process to normalize and index each data series into an overall score for each of the three drivers. The combined aggregated data help to measure the likelihood that the economy is showing signs of overactivity and that we may be approaching a cyclical peak.
Borrowing is measured by the selected criteria: credit card debt, consumer debt payments, business debt, and commercial loan growth.
Confidence is measured by the selected criteria: consumer confidence, valuations, wage growth, and business leverage.
5 Forecasters: Late Cycle Warning?
There is no magic formula for predicting recessions and bear markets—every cycle is dierent. But we believe the Five Forecasters cover a variety of perspectives and help capture a more complete view of the economic and market environment. They are meant to be considered collectively, not individually.
The PE ratio (price-to-earnings ratio) is a valuation ratio of a company’s current share price compared with its per-share earnings. A high PE suggests investors are expecting high earnings growth in the future, compared with companies with a lower PE.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.