Civilian Unemployment Rate (UNRATE) breaks its 12 month moving avarage

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frihet
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Civilian Unemployment Rate (UNRATE) breaks its 12 month moving avarage

Post by frihet » Fri Feb 01, 2019 11:53 am

I use a simple trend following approach on my GB/IVY portfolio. To avoid market noise it switches on/off trend following on the equity portion by calculating the 12-month moving average on UNRATE. Today we got a clear signal that the trend line is broken from below which historically has been a forward-looking recession indicator.

Will it work this time also? Or will the FEDs new dovish stance save the day once again? Thoughts appreciated.

https://fred.stlouisfed.org/series/UNRATE/

Read more at

http://www.philosophicaleconomics.com/2016/02/uetrend/

"In the following chart, we plot the unemployment rate alongside its trailing 12 months moving average from January 1948 to January 2016. The red and green circles delineate important crossover points, with red crossovers delineating upward (bearish) turns, and green crossovers delineating downward (bullish) turns:

As you can see, historically, whenever the unemployment rate has crossed above the moving average, a recession has almost always followed shortly thereafter. Similarly, for every recession that actually did occur in the period, the unemployment rate successfully foreshadowed the recession in advance by crossing above its moving average."

wolf
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Re: Civilian Unemployment Rate (UNRATE) breaks its 12 month moving avarage

Post by wolf » Fri Feb 01, 2019 1:06 pm

Thank for posting frihet. I wasn't aware of that. That's an interesting article. Indeed it looks like that there is a correlation.

frihet
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Re: Civilian Unemployment Rate (UNRATE) breaks its 12 month moving avarage

Post by frihet » Fri Feb 01, 2019 1:57 pm

You are very welcome wolf. Happy to contribute where I can. Am also of course always interested to read the following discussion by the bright analytical minds that reside on the forum.

frihet
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Re: Civilian Unemployment Rate (UNRATE) breaks its 12 month moving avarage

Post by frihet » Fri Feb 01, 2019 2:52 pm

Reached out to BigERN/Karsten of earlyretirementnow who used to work in finance following hundreds of indicators. See his blog post below of what he sees as the 3 most important.

https://earlyretirementnow.com/2018/02/ ... economics/

His take was that it's because of the government shutdown and that we need to watch the weekly unemployment claims to see if they normalize. In that case, it was a false alarm.

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