Sep 16

Does the authority on recessions have it wrong?

By MultiplyWealth's Team

Lakshman Achuthan of The Economic Cycle Research Institute (ECRI) has reiterated his call that the U.S. is probably in recession right now.

Never heard of him? Well, perhaps you’ve heard of ECRI. For many market pros, ECRI is the authority on recessions. The research group is credited with correctly predicting recessions going back 20 years, and fornever issuing a false alarm.

There’s a first time for everything, of course. Some including Doug Short , research VP at Advisor Perspectives, has recently argued at length that ECRI has it wrong this time.

At least this much is true: ECRI’s latest recession call is getting to be very stale at this point. It warned back in September last year that the U.S. was tipping toward economic contraction.

A year later, ECRI is still articulating its call. It reiterated its main arguments in March, and has since done so since then in the media.

ECRI uses four main indicators to help guide its conclusions. As Short points out, only one -- retail sales -- looks like it’s rolling over. And it’s the most volatile of the bunch.


The group’s real claim to fame, however, is its Weekly Leading Index; it’s more or less the secret sauce in the group’s quantitative work.

The Weekly Leading Index, however, rose in the latest week, in fact, it’s been rising for five weeks straight.

The upshot? This economy is a very tough call right now. Even the great minds at ECRI including Achuthan and the formidable Anirvan Banerji appear to be having a tough time gauging it.

If you want to talk about how potential market events or the fiscal cliff might affect your equity portfolio, and perhaps talk about whether some of our defensive-minded investment strategies might be right for you, write Multiplywealth at It’s your own account; you can see the balance change on a daily basis, make investment changes extremely quickly, and add to or pull your money at your complete discretion.

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