“The stock market has forecast nine of the last five recessions”.

[Free Trade is managed by the invisible hand.]

Qoute by Paul A. Samuelson.

I find this to be rather interesting but I am not very familiar with the history of the stock market, does anyone want to inform me?

[WillK]

Qoute by Paul A. Samuelson.

I find this to be rather interesting but I am not very familiar with the history of the stock market, does anyone want to inform me?

Some people think that movements in the stock market are predictive of whats coming.
Samuelson was making fun of that view.

[phk]

Qoute by Paul A. Samuelson.

I find this to be rather interesting but I am not very familiar with the history of the stock market, does anyone want to inform me?

Some people think that movements in the stock market are predictive of whats coming.
Samuelson was making fun of that view.

Even a better predictor. Of the past 10 recessions, 9 were preceded by increases in oil prices.

[Verily]

Qoute by Paul A. Samuelson.

I find this to be rather interesting but I am not very familiar with the history of the stock market, does anyone want to inform me?

Some people think that movements in the stock market are predictive of whats coming.
Samuelson was making fun of that view.

It wasn't that general. Samuelson was making fun of the doom and gloom people start predicting when the stock market declines. He was saying that the stock market randomly declines almost as often as it declines coinciding with actual economic problems.

[phk]

Qoute by Paul A. Samuelson.

I find this to be rather interesting but I am not very familiar with the history of the stock market, does anyone want to inform me?

Some people think that movements in the stock market are predictive of whats coming.
Samuelson was making fun of that view.

It wasn't that general. Samuelson was making fun of the doom and gloom people start predicting when the stock market declines. He was saying that the stock market randomly declines almost as often as it declines coinciding with actual economic problems.

There are a good number of stocks that do track the business cycle with some lag.

[○∙◄☻¥tπ[╪AV┼cVê└]

180% is a pretty good batting percentage, but there may be something wrong with that statistic.

[Bo]

Well, I know the stock market predicted a recession in 1987. When else did it fail?

[phk]

Well, I know the stock market predicted a recession in 1987. When else did it fail?

It's all a game of testing correlations of time series data.

You could likely create your own index of stocks you think tend to track the business cycle. Than extend the data out for the past and than see how well the time series predicts GDP and follows the business cycle.

I'm not sure what good stocks their are but I would heavily weight it for retail stores such as Target.

Depending upon the brand quality of the company, you should look for companies who produce or sell goods that are mostly considered "normal goods". I hypothesize that a luxury brand might be more prone to excessive volatility and that a inferior brand might be negatively correlated with the business cycle.

Edit: Maybe some futures would help.

[Queen Mum Inks.LWC]

The stock market isn't exactly reliable.  Especially now that we have everything electronic and we're watching everything in the stock market constantly.  Just look at the recent Procter and Gamble incident from earlier in May - the typing of the wrong character caused the Dow to go crazy.

[k-onmmunist]

Well, I know the stock market predicted a recession in 1987. When else did it fail?

Actually, it didn't. People thought there would be meltdown and depression. But growth continued until a minor recession in 1990.

[Mr.Phips]

Well, I know the stock market predicted a recession in 1987. When else did it fail?

I know the stock market drop in 1962 didnt forshadow a recession, nor did the drop that lasted from mid 1965 through mid 1966.  From looking at this chart, the market has been pretty good at predicting recessions.  A significant and sustained drop usually signals that a recession is about six months to 18 months away.  If the DJIA is still below 10,000 by the end of the year, there is a decent chance that we will be in another recession by mid next year.