A recession is coming
There is no doubt that the economy is slowing.
The leading economic index fell in December, marking the fourth decline in five months.
Combine that with the inevitable stock market correction from a Bernie Sanders nomination, and you have a stalled economy by summer.
Last week an MIT study showed that the danger is considerable.
The MIT Sloan School of Management and State Street Associates took an interesting — albeit, somewhat creepy — new approach in a study that found there is now a 70% chance a recession will hit the U.S. within the next six months.
Researchers analyzed monthly changes among four indicators: industrial production, nonfarm payrolls, stock market returns and yield curve slope. The relationship between those four data points was then compared to historical data from 1916 on.
Researchers found that the unique index, they call the KKT Index of the Business Cycle, has risen “leading up to every recession so that the combination of its trajectory and level provides a reliable indicator of the likelihood of recession,” they wrote in the study.
The index’s latest reading showed the chance of recession was twice as high as growth over the next six months. The study found that when probabilities reached this high a level, a recession occurred 70% of the time.
“This level is driven primarily by two factors: weakening industrial production and the slope of the yield curve,” Kinlaw said.
The entire election conversation is about to change.