Both the New York Fed’s recession model and the Bloomberg economist survey indicate a 35% chance of a recession in the next 12 months. This means two out of three economists believe we will not have a recession.
So who are we supposed to believe?
Frustrated by the poor prediction record of fellow dismal scientists, Kenneth H. Thomas, president of Miami-based Community Development Fund Advisors LLC, studied calendar anomalies, defined as a result “inconsistent with the present economics paradigm.” In other words, “economic alchemy,” with a prediction based on a calendar rather than an economic algorithm. Instead of a Wharton Ph.D., you only need your phone’s calendar app.
The best-known calendar anomaly, the “January effect,” suggests stocks, especially smaller ones, do best then, clearly the case this past January, the best since 1987. Other stock market anomalies identify September as the worst month for investing, Monday the worst day and Friday the best.
His research concluded that calendar anomalies also exist with business cycles. He coined the term “Turn Of Decade” or “TOD” effect in November 1990 to refer to the unusually high likelihood of a recession beginning in years ending in 9 or 0. Mr. Thomas stated that a mild recession had begun in August or early September of 1990 and would end the following year. The National Bureau of Economic Research later declared a recession began in July 1990 and ended in March 1991.
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