Tuesday, October 4, 2011

Market shows a recession coming. Is this just a false signal?

Knowing that these complex trading patterns must play out cycles within cycles the recent swings of sentiment present in the dough-doe-minded mass-media should be taken with a note of caution: the stock market has correctly foretold 9 of the last 5 recessions.


Stock market signals on recession may be wrong: UBS

NEW YORK (Reuters) - The stock market has a poor record of predicting U.S. recessions and is likely sending false signals again, according UBS strategists, who expect the S&P 500 index to post double-digit gains by the end of 2011.

Excluding the current downturn, the S&P 500 has shed more than 17 percent 14 times since the end of World War Two, but the economy only fell into recession on nine of those occasions, equity strategists of the Swiss bank wrote in a research note published Thursday.

"Put differently, the market predicted roughly a third more recessions than actually occurred," they wrote in the report, entitled "14 of the last 9."


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