US ECONOMIC CYCLE AND RECESSION PROBABILITY UPDATE – FEBRUARY 2018

Summary: Despite an expensive market, economic risks are falling. Stay invested.

Risks have reduced in the last quarter. The Economic Cycle model is showing that Economic Expansion conditions are accelerating and Late Cycle conditions are no longer the dominant force. It is hard to know how long this Economic Expansion phase can retain its strength, but we are now likely looking at a second wind for the US economic cycle. The Recession Probability model has actually decreased, a very positive signal. Economic momentum is positive, and despite the market near all-time valuation highs, we recommend remaining invested, albeit cautiously. We do not believe portfolio leverage would be wise in light of high market valuations, but a move to cash would be too early.

The economic cycle is showing accelerated Economic Expansion phase conditions, implying momentum is clearly continuing.

Recession probability has taken a large step down to 37% from 43% in the prior quarter. In the past, recessions have occurred with at least 70% probability of recession on our model.

Market valuation, as measured by the Wilshire 5000 All Cap index divided by GDP is near all time highs making the risk-reward of investment in the market index a weak proposition. This would suggest any long investments made must come with a strong thesis. Portfolio leverage is NOT advised.

Liquidity based Economic Leading indicators are not currently supportive of the forward outlook for US PMI (economic strength), and risk assets are clearly currently benefiting from economic momentum (as seen above), however as this slows, the negative impacts of decreasing market liquidity will start to become more obvious.

Our stop-loss tool (global market breadth index) has not yet triggered a sell signal.

www.RecessionProtect.com is an organization formed to bring simple, back-tested & rules-based economic analysis to the mass market. No extra fluff.

Summary: Despite an expensive market, economic risks are falling. Stay invested.

Risks have reduced in the last quarter. The Economic Cycle model is showing that Economic Expansion conditions are accelerating and Late Cycle conditions are no longer the dominant force. It is hard to know how long this Economic Expansion phase can retain its strength, but we are now likely looking at a second wind for the US economic cycle. The Recession Probability model has actually decreased, a very positive signal. Economic momentum is positive, and despite the market near all-time valuation highs, we recommend remaining invested, albeit cautiously. We do not believe portfolio leverage would be wise in light of high market valuations, but a move to cash would be too early.

The economic cycle is showing accelerated Economic Expansion phase conditions, implying momentum is clearly continuing.

Recession probability has taken a large step down to 37% from 43% in the prior quarter. In the past, recessions have occurred with at least 70% probability of recession on our model.

Market valuation, as measured by the Wilshire 5000 All Cap index divided by GDP is near all time highs making the risk-reward of investment in the market index a weak proposition. This would suggest any long investments made must come with a strong thesis. Portfolio leverage is NOT advised.

Liquidity based Economic Leading indicators are not currently supportive of the forward outlook for US PMI (economic strength), and risk assets are clearly currently benefiting from economic momentum (as seen above), however as this slows, the negative impacts of decreasing market liquidity will start to become more obvious.

Our stop-loss tool (global market breadth index) has not yet triggered a sell signal.

www.RecessionProtect.com is an organization formed to bring simple, back-tested & rules-based economic analysis to the mass market. No extra fluff.