Onwards and Upwards...

 ..or the latest update to the Monthly timing indicators for the UK equity market. At the end of November most of the main indices (based on their total returns indices) were still around 5% above their 10 month moving averages and therefore still indicating a bullish trend. The Mid 250, in a turnaround from the last few years, continues to be the only laggard by being only 3% or so above its moving average as it continues to suffer something of a post Brexit hangover.

Meanwhile over in the US, the Unemployment rate, the other recession indicator that I'm keeping an eye on has spiked down to 4.6% taking it below its moving average again. This is supportive in this case as we are looking for a decisive break of this above its 12 month moving average to indicate the risk of a coming recession in the US which would then likely affect UK and other stock markets negatively.

This follows on from the bullish moves in the US stock market which has been prompted by the Trump election victory and hopes of a fiscally led reflation. In addition to the stronger employment picture other US statistics have shown stronger wage growth, consumer confidence and exports which seem likely to lead to upgrades to Q3 GDP to over 3%, which would be the fastest rate in over 2 years. So if anything the US economy seems to be going from stumbling along to a bit more strength in the short term with hopes of more growth and inflation next year, as is being discounted by moves in bond and equity markets - if Trump delivers on his manifesto promises. This is by no means guaranteed though as possibly indicated by this article. It does also mean the the long awaited Federal reserve rate rise is now almost certain this month with possibly more to come next year.

Despite all the bullishness surround the election of Donald Trump I did see one possibly spurious correlation or statistic that someone came up with regarding the election of a President after a two term president. In this piece that appeared on Zerohedge and noted that since 1910, the US economy is either in recession or enters a recession within twelve months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new President.

So that might indicate that things could be less bullish than the current economic news and market moves suggest, but given the limited data points etc. I'm not too sure about this indicator. What was of more interest perhaps though was an interesting video from the author of the original piece Raoul Paul, a Hedge fund manager, on his thoughts about using cycles to predict economies, stock markets, interest rates and commodities. Sounds too good to be true I know, but there is some good stuff in here and well worth 40 minutes of your time if you can spare it. It also reminded me about the usefulness of the ISM index as a predictor of recessions with associated probabilities so I'll be adding that to the list of things on my recession watchlist going forwards.

If you want to learn more about that and his thoughts on cycles you can either view the video in the original piece above or in the video below.  Finally a hat tip to the excellent John Mauldin and his useful weekly Thoughts from the front line which is what put me onto these pieces in his recent post titled - What Should Trump Do? This is a free newsletter which is well worth signing up for if you have not already done so.

So there you go none of the indicators discussed above, apart from the questionable President following a two term one, suggest an imminent recession in the US, so for now I'll continue to ride the bull until such time as these indicators signal that there may be trouble ahead. All that leaves me is to wish you Happy investing and a Merry Christmas just in case I don't get around to posting again before then.