Recission Probabilty Indicator

The Recession Probability Indicator (RPI) is a quantitative, completely mechanical and emotion free way of looking at the strength of the US Economy.  When the reading is high it warns of coming slow downs and serves as a warning sign to investors.  While its use is flexible, it is generally a good idea to use caution when investing in higher risk US assets such as stocks and high yield bonds when the reading is in red. 

When the indicator reads above 50 we feel there is a high probability the US Economy will worsen in the following month and therefore stocks should be invested in with caution.  Generally, when this occurs we reduce stock exposure by 50% on our FormulaFolio Investment Strategies.

When the indicator falls below 45 after being above 50 we invest fully per our FormulaFolio Investment Strategy models.  This is also our method of investing when the indicator is below 50 when the subsequent months reading was below 50.

Please remember:  The indicator reading for this month should affect NEXT months investing decisions.  This ensures plenty of time to think about changes you may want to have ready BEFORE the month begins.  Past performance is no guarantee of future results.  Use at your own discretion.  Reading is supplied without warranty.  While care has been taken to ensure calculation is posted accurately, we cannot guarantee the posting for public domain is accurate at all times.