Investors are growing weary of the ‘no-show’ recession: Why this analyst says an overall economic downturn is less likely

Jun 23, 2023 2:27 am | 2 minutes read

The Conference Board’s leading economic index released on Thursday showed an extended downward trend, but one analyst indicated he was not concerned.

The LEI is a composite index of various variables designed to predict turning points in the economy. This predictive index is highly correlated with GDP.

What happened: Although the LEI has been declining for 14 months, there is little evidence that the US is headed for a recession, he said Yardeni Research. The company noted that the index of concordant economic indicators pointing to the current situation rose to a record high.

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The Index of Leading Economic Indicators (LEI) has been falling for 14 months, but there is little sign that the US is headed for recession. In fact, the Index of Coincident Economic Indicators (CEI) hit another record high in May. pic.twitter.com/KAek41mOL5

— Yardeni Research (@yardeni) June 22, 2023

The Conference Board said in a statement it expects a recession beginning in the third quarter of 2023.

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However, analysts at Yardeni Research disagree. “We believe we are in a prolonged recession, which makes a macroeconomic recession less likely,” the company said.

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Strong economic signals: Yardeni Research found that vacancies remain very high. But the number of new jobless claims, which is part of the LEI, was 264,000 in the week ended June 17, flat from the previous week. This was the highest level of initial applications since October 2021.

The yield curve, another component of the LEI, has been a negative contributor since its inversion last summer, the company said. Although the banking crisis in March had accurately predicted it, a macroeconomic credit crunch or recession had not materialized, it said.

The companies also noted that the S&P 500 Index, another LEI constituent, has rallied since last October. “Investors are getting tired of waiting for a recession that everyone is expecting and that doesn’t materialize,” it said.

Continue reading: ‘A recession will likely be necessary’: JPMorgan just issued a strong warning on stocks, saying the impact of rising rates is ‘not yet being felt’

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