Fintech executive, writer, math geek, and investment systems developer. Founder and CEO of Altruist and Founder of FormulaFolios.

Recession Probability Update - September 2011

Recession Probability Update - September 2011

Greetings, Each month we measure the strength of the US Economy via our  Recession Probability Analytics (RPA).  RPA ranks the economy on a scale  of 1 to 100 with 1 being the best and 100 being the worst possible  economic conditions.

We feel this takes the guesswork out of how strong or weak the  markets are as well as give investors a gauge on how "safe" investing  conditions are.  While not perfect, RPA has proven very useful in  helping investors avoid major stock market declines by providing a  warning when the measurement is higher than 50.

This months RPA:  46.19 Last months RPA:  38.74

This is the largest jump in recession probability we've had since 2007 - so it's definitely worth noting.  When/if the number goes above 50 our stance is to immediately reduce our exposure across all asset allocation models by 50%.  So a portfolio that would traditionally be 60% growth/40% income would become 30% growth/70% income.

For the time being nothing is changing, but it certainly looks like with even modest deterioration from here moving to an even more conservative stance could be in the cards before year end.

If you have any questions feel welcome to use the comment feature below and if you know of anyone who might benefit from this type of analysis please help us spread the message by emailing them a link to this page.


Jason Wenk

Is now a good time to be conservative?

Market Update - August 26, 2011