Note: The following is some proprietary research submitted by a colleague of ours at Echobay and published here on the OT with their permission. We are sharing this piece publicly, but please note that other content like this and OT’s Live Chat  is reserved for subscribers only. We do not claim  it to be 100% accurate, and frequently Echobay utilizes this type of work to make our own  assessments. Here is that work unedited by us-  VBL

Via Puru Saxena, Independent Analyst

HISTORICAL FACTS

All the past 9 recessions/bear markets were accurately predicted by the yield curve inversion (10-Year US yield (-) 3 month US yield)

In each instance, inversion occurred on a monthly closing basis

Yield curve inversion never produced a false signal

On average, the stock market peaked 8.33 months after the inversion (*)

* 3 times, the stock market peaked BEFORE the inversion and by that time, the S&P500 had already lost between 6.5-10%

* 6 times, the stock market peaked several months AFTER the inversion (during such times, stock market gains were 10-23% after inversion)

On average, the recession started 14 months after the inversion of the yield curve

After inversion, the average bear-market decline was 33% and on average, the bear-market lasted for 16.7 months

In each instance, the final low of the bear-market was either at or significantly below the level of the S&P500 at the time of inversion

Bear-market              Decline      Bear-market duration                                               Inversion lead time

 

Jul ’56 – Oct ’57            (-)22%               15 months        4 months after S&P top (S&P had already dropped 6.5%; final low 16% below inv. level)

Aug ’59 – Oct ’60          (-)14%               14 months        1 month after S&P top(S&P had already dropped 7% ; final was 8% below inv. level)

Dec ’68 – May ’70         (-)37%               17 months       12 months before S&P top(S&P rallied an extra 14.7%; final low was 28% below inv. level)

Jan ’73 – Oct ’74            (-)50%               21 months        8 months before S&P top (S&P rallied an extra 10%; final low was 45% below inv. level)

Feb ’80 – Mar ’80          (-)19%                 2 months       17 months before S&P top (S&P rallied an extra 15.3%; final low was 6% below inv. level)

Nov ’80 – Aug ’82         (-)29%                21 months       2 months before S&P top (S&P rallied an extra 12.8%; final ow was 17% below inv. level)

Jul ’90 – Oct ’90            (-)20%                  3 months      17 months before S&P top (S&P rallied an extra 22%; final low was same as inv. level)

Mar ’00 – Oct ’02          (-)50%                31 months      1 month after S&P top (S&P had already dropped 10%; final low was 45% below inv. level)

Oct ’07 – Mar ’09          (-)58%                17 months     21 months before S&P top (S&P500 rallied an extra 23%; final low was 48% below inv. level) 

Contact Puru HERE

 

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Good Luck – VBL