The Great Recession which started in 2007 came as a shock. Hardly anyone expected it. Now, a prominent indicator says you’ll want to prepare for an even worse economic downturn. Our December Elliott Wave Financial Forecast makes the case:
The stock market almost always leads the economy. A significant exception took place at the end of Supercycle wave (III) in 1929, when the economy topped coincidently with the stock market in September. The stretched nature of the current rally and the clear weakening of economic fundamentals suggest that the economy’s Supercycle turn into an economic contraction of unrivaled proportions may coincide with the peak in stocks this time, too. This potential could not be further from the consensus expectations of economists, who believe overwhelmingly that the Federal Reserve has succeeded in raising interest rates just enough to slow inflation but not halt economic growth. A plethora of data suggests otherwise. This chart shows that the Conference Board’s Leading Economic Index (LEI) peaked in December 2021:
The index has not had an uptick for 32 consecutive months, since February 2022. It’s now at its lowest level since March 2016. In the history of the data back to 1959, there has never been a turndown of this magnitude without an ensuing recession. In December 2022, EWFF showed the LEI’s reversal and asserted that it would lead to a global depression. With the economy reputedly humming and a businessman returning to the White House, however, economists see virtually no chance of even a short recession. The current LEI decline is a Fibonacci 34 months old, starting at the December 2021 high. Prior to the current contraction, the longest LEI decline prior to a recession was a Fibonacci 21 months, from March 2006 to December 2007. It was followed by the steepest economic contraction since the Great Depression. The coming recession should be commensurately larger.
Let’s say another severe recession does develop and takes most everyone by surprise. Are YOU prepared? If you’re unsure, read the special Elliott Wave International report “Preparing for Difficult Times.” You can access it for FREE as you follow this link.
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