In late July the Economic Cycle Research Institute (ECRI) was getting all of the press because nearly everyone (except ECRI) was touting that a -10% leading indicator most surely meant that we were headed for a double dip recession. As David Rosenberg put it:
The growth rate on the ECRI leading index did it again! It sank further into negative terrain, now at -9.8% during the week ending July 9, down from -9.1% the prior week. This was the tenth deterioration in a row and the growth index is now negative for six straight weeks. We have never failed to have a recession with the ECRI at current levels but there is also inherent volatility in the index that requires acknowledgment. Our reckoning is that in the past few weeks, the index has gone from pricing in even-odds of a double-dip to two-in-three odds. It may take a while, but Mr. Market will figure it out before long.
When the indicator bounced back from -11% to a recent mark of -3.1% it received far less media attention.
If you don’t want to interpret the chart, take it from the co-founder of the ECRI, Lakshman Achuthan. “Revival of Economic Growth…Pace of the recover will accelerate and not decelerate” –
As a follow up to my interpretation of the market at the time, I did suggest that taking risk would reward.