There's a 70% Chance Of Recession In The Next Six Months, New Study From MIT And State Street finds

CNBC ^ | 02/05/20 | Pippa Stevens

[Enlightened1]

• A new study from the MIT Sloan School of Management and State Street Associate says there's a 70% chance that a recession will occur in the next six months.
• The researches used a scientific approach initially developed to measure human skulls to determine how the relationship of four factors compares to prior recessions.
• The index currently stands at 76%. Looking at data back to 1916, the researchers found that once the index topped 70%, the likelihood of a recession rose to 70%.

 

There's a 70% chance that a recession will hit in the next six months, according to new research from the MIT Sloan School of Management and State Street Associates.

The researchers created an index comprised of four factors and then used the Mahalanobis distance — a measure initially used to analyze human skulls — to determine how current market conditions compare to prior recessions.

"The Mahalanobis distance was originally conceived to measure the statistical similarity of the values of a set of dimensions for a given skull to the average values of those dimensions for a chosen group of skulls," the researchers explained.

It measures the distance between a point and a certain distribution.

Using this principle, the researchers analyzed four market factors — industrial production, nonfarm payrolls, stock market return and the slope of the yield curve — on a monthly basis. They then measured how the current relationship between the four metrics compares to historical readings.

Looking at data back to 1916, the researchers said that the index was a reliable recession indicator since it rose leading up to every prior recession. They found that when the index topped 70%, the likelihood of a recession in the next six months rose to 70%.

[from occupied ga]

Phrenology makes a comeback!

[Jeff Chandler]

The economic disruption from the shutdown of China is going to be epic

Either that or the virus will run its course and China will boost American agriculture to new heights.

[be-baw]

“The researches used a scientific approach initially developed to measure human skulls to determine how the relationship of four factors compares to prior recessions.”

That’s about as stupid as it gets.

[Enlightened1]

Agree 100%

[Zenjitsuman]

Kudlow told Maria that with only 11 virus cases and the infected getting better the USA is doing OK.

Kudlow says Chinas economy is taking a big hit, but he predicted a 0.2 percent GDP decline in the USA but we will
make up way more than that with the USMCA, Japan and Korea
trade deals. He also said housing starts and low interest
rates will fuel housing construction

[Leep]

If you bump your head you automatically gain 10 IQ points.

[Enlightened1]

Agree with your assessment.

[SaxxonWoods]

They better hurry. There’s only 8 months left until the election and it takes two quarters (6 months) of contraction to indicate a recession.

They need a quick downturn. Maybe the Chinavirus will come through for them.

[Caipirabob]

The democrats are likely actively seeding our nation with coronavirus as we chat. There is nothing horrific beyond them.

[EBH]

I would tend to think a recession is on the horizon. But it won’t be from the usual culprits, it will be due to a pandemic

[bert]

For a recession, there must be two successive quarters of negative GNP growth.

Since the first quarter is half gone and growing, there is no possibility of two downtruning quarters in the next six months.

[mjp]

The treasury secretary on Thursday confirmed that the White House is pushing for a new tax overhaul that will be published in the coming months.

[Dr. Sivana]

Not just the housing market per se, but a lot of non-productive home mortgages being repackaged as solid investments, and Bear Sterns going under caused a panic.

[Zenjitsuman]

Kudlow said expect Tax Cuts 2.0 in September just before
the elections. He said Trump wants people to think about
him cutting taxes, while forcing Dems to admit like Mondale
did that Dems will raise taxes.

[DoodleDawg]

The old joke is that economists have predicted fourteen of the last three recessions.

[elcid1970]

“I bet Larry Kudlow would say these scientists need their own skulls examined.”

I know what I’d like to do with their skulls.

Most scientists are liberals, but seeking to tank the economy and impoverish millions just to defeat Trump is TREASON!!!

[LibWhacker]

Good point. These “scientists” don’t even know the definition of ‘recession.’ But they’ve studied it and are predicting one.

[ryderann]

“They would sooner turn us into Venezuela than to have Trump re-elected.”

For sure. This is the proven formula to redistribute the wealth of millions of citizens into the hands of a relative few.

[txrefugee]

The Fake News as been trying to sink Trump’s great economy for three years. No one cares. Those Wall Streeters who hoped for recession lost a ton of profits.

[Agatsu77]

What a pile of crap! the Mahalanobis distance is a pattern recognition tool. The technique was first reported to be used to measure similarities in skulls back in 1927. The technique is much older. The article is trying to make the point that it is weird that something used to measure skulls can somehow determine that a recession is coming. (I am not sure that I remotely believe their findings.)

It can be used on ANY sort of data. In graduate school I used it to characterize Iris flowers, and after graduation I used it to determine oil baring rock formations for an oil exploration company. Several years later I used it to determine the effects of damage on explosives energetics.