Why a U.S. Recession May Foil Economists’ Expectations

You may have heard that Germany has slipped into a recession.

What you may not have heard is, the German government anticipated an economic uptick in Q1, not a slide.

Reality failing to meet expectations may extend beyond the German economy. A similar scenario could play out in the U.S.

Here's what I mean: The Federal Reserve Bank of Philadelphia's Second Quarter survey revealed that the average expectation of 38 "professional forecasters" is for real GDP growth of 1.3% in 2023.

Perhaps these professionals have not taken a hard look at some key leading economic indicators, or if they have, they interpret them differently than Elliott Wave International.

Specifically, our just-published June Elliott Wave Financial Forecast showed this chart and said:

Many classic indicators of a recession are exactly where they were at the beginning of past recessions. In fact, the year-over-year change in the Conference Board's Leading Indicators Index, which includes 10 different measures, is at -8% ... similar readings came near the outset, or in, each of the last four recessions. In April, just three out of ten indicators were positive... A 4% decline in the LEI index signals a recession, according to the Conference Board, so the majority of economists are clearly bucking history.

Now, one of the three of ten indicators that are positive is the S&P 500.

What are the expectations for this index?

Here's a May 8 headline from Marketwatch:

S&P 500 could rise as high as 4,400 in coming months, says Wall Street strategist who called 2023's rebound

Yes, big technology names helped to carry the S&P 500 higher. And this strategist might turn out to be right about the future performance of the index.

However, it might be a good idea to check out what the Elliott waves are saying about the stock market. After all, the performance of the economy tends to follow the performance of the stock market.

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