The first recession indicator to accurately time recessions was just released, and what it shows for a 2024 recession is SHOCKING! The recession 2024 downfall to the stock market could cause the S&P 500 to drop 24% over the next 6 months. This new recession indicator has correctly timed EVERY RECESSION and now it’s predicting the start of the 2024 recession, which might actually end up being a 2023 recession that starts in December of this year. The latest stock market news gives new insight into technical analysis and today’s stock market analysis. Combined with the other recession indicators, such as the leading economic indicators and inverted yield curve, it appears more likely than not that a recession in 2024 will occur.
This is shocking. It is an absolute nightmare for the markets, and nobody saw it coming. We’ve all seen the recession indicators that very accurately predict whether or not a recession will start, and all of them have shown that a recession is coming at some point. The problem with these recession indicators, such as the inverted yield curve, as well as the leading indicators, and many other recession indicators, is that while they do accurately predict that a recession will come at some point, they are terrible at timing that recession.
Well, a brand new recession indicator that accurately predicts the timing of a recession was just released. And the results are shocking. So much so that JPMorgan Chase is now predicting that the S&P 500 will fall 24% over the next six months. I’m Scott Curry, I’m a former Merrill Lynch and Morgan Stanley investment banker. I’ve been trading for over 25 years. I’ve seen my fair share of recessions and downfalls in the market, and this even shocked me.
There’s no doubt investors are bullish right now, with Apple reaching a new all time high, hitting $3 trillion in market cap for the first time in history. The Dow Jones Industrial Average also hit a record high this week, and Bitcoin topped $44,000 for the first time in a year and a half. Meanwhile, gold also hit a record high. And all of this enthusiasm is coming because of the Federal Reserve. The market initially sold off in 2022 as inflation skyrocketed and the Federal Reserve had to rapidly raise interest rates at the fastest pace in history. But now the rate of inflation is slowing, falling all the way down to 3% on a year over year basis on headline PCE, and down to 3.5% on the core PCE. We are now getting very close to the Fed’s target of 2%.
And as inflation continues to fall, this has caused many investors to believe that rate cuts are coming and that a rate cut rally is going to fuel a massive rise in the stock market. But not everybody is in agreement. Some investors believe that the Fed’s key inflation report might actually delay rate cuts until it shows inflation at 2%, which in turn could cause the S&P 500 to fall. And even Jerome Powell himself agrees with this, warning that it’s premature to discuss interest rate cuts right now. Despite all of the market’s enthusiasm and optimism right now, it’s always important to remember that there are factors that could bring down the US economy and, in turn, the stock market.
And one of the most important things to remember is that if the Federal Reserve does cut interest rates, it’s usually because there is something majorly wrong with the economy, such as a recession. And the latest data this week shows that the US economy is in fact slowing down. On Monday, US factory orders showed a drop of 3.6% in October, showing very weak demand on factory orders. This could cause GDP to fall in Q4, which in turn could help trigger a recession. In addition, layoffs are rising once again. Spotify announced they’re going to lay off 17% of their employees, and Wells Fargo’s CEO warned of a severance cost of nearly $1 billion in the fourth quarter as they get ready to lay off a large number of their employees. And it’s not just an increase in layoffs and a worsening job market that’s causing many to believe a recession is on the horizon.
There’s also been a decline in the amount of investments that’s going into businesses. Virgin Galactic shares plunged after Branson ruled out further investment into the company. This follows the most current trend of a continuing decline in venture capital deals and business investments. Bears are also focused on the fact that the delinquency rate on credit cards has increased to the highest level in more than ten years. Although bulls would point out that credit card delinquencies are still much lower than historical averages. And while all of this data is important and certainly shows that a recession will occur at some point, timing that has historically been extremely difficult.
However, the latest report that just came out today, specifically dealing with the jobs report, actually times that recession for the first time. Job openings in October slid to 8.7 million, which was well below the estimate. And while some economists say that the weak job data suggests a soft landing is increasingly likely, other economists warn that the jobs data points to the market being very close to a major recession. When comparing the number of job openings to the number of unemployed workers, any time the number of unemployed workers rises above the number of job openings, this almost always indicates a recession is currently underway. And lately, the number of job openings has continued to decline while the number of available workers has continued to go up. At its peak, there were 1.9 jobs for every one available worker. Today, that number has declined to 1.3 jobs for every one available worker. Yet none of this really shows the timing of when that recession will actually start.
But a brand new indicator that was just released does time the start of the recession. And let’s talk about what it shows. The recession indicator uses the jobs market data, and it shows that a major recession is looming. The recession indicator is called the Sahm Rule. The Sahm Rule is designed to rapidly determine if the US economy is currently in a recession, at least in part, so that policymakers can respond and avoid a major recession. The metric examines the current three month average of the unemployment rate, compared to the low unemployment rate from the previous 12 months. The 12 month low of unemployment is currently at 3.4%, as it occurred twice in both January and April of this year. The most recent readings of unemployment for the past three months, looking at August, September and October, are 3.8%, 3.8% and 3.9%.
Now, if you look at the average of those, it’s an average of 3.8%. And if you take 3.8% and you subtract it from the low of 3.4%, you get a difference of 0.4%. Now, the Sahm Rule says that if that difference becomes 0.5%, then we are officially in a recession currently. Therefore, should unemployment remain at or above the current 3.9% level for November and December jobs report, or simply spike to 4% in November, then the indicator will call for a recession currently underway.
And guess what? The official US unemployment rate for November is being released on Friday, and it is expected to show unemployment at 3.9%. And if unemployment does in fact come in at 3.9% or higher, the last three month average will now be 3.9%. When you subtract the low of 3.4%, that will officially put us at the 0.5% difference, which will put us in a recession currently. According to the Sahm Rule, once the 0.5% level is hit, which it is expected to hit on Friday, unemployment does tend to climb during the duration of a recession.
So how accurate is the Sahm Rule at predicting a recession? Well, the Sahm Rule has consistently called recession since the 1960s, and not only has it called a recession, it has been extremely accurate at timing the start of that recession. But it’s important to understand that the Sahm Rule has also seen a few false positives. While the indicator always calls a recession, in a few very unlikely scenarios the warning has been triggered without a recession occurring. Still, given the current jobs data, a 2024 recession might be argued to be more likely than not.
And with the Sahm Rule giving a strong indication that a recession is most likely starting now, this has caused JP Morgan’s top chartist to predict that the S&P 500 will tumble all the way back down to 3500, retesting the bear market lows of October 2022, and dropping the S&P 500 by 24% over the next six months. JP Morgan Chase believes that the Sahm Rule will, in fact, predict a recession starting now, and as a result, JP Morgan Chase believes that the stock market will start to fall over the next six months as we get deeper and deeper into a recession, which is starting now. As a result, they believe the S&P 500 will drop significantly.
So what do you think? Will the S&P 500 drop 24% over the next six months, or will we continue to rally, as I showed in a previous video? What do you think? Are you a bull or a bear? Are we going to rally to new all time highs and much higher – that 100% average increase over the next three years that one indicator strongly shows? Or are we going to fall 24% like JP Morgan thinks we will as we enter a recession, and continue in that recession for the next six months? Let me know in the comments below what you think.