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Thursday, December 31, 2009

ECRI's 2010 Cyclical Outlook

The Economic Cycle Research Institute's (ECRI) managing director, Lakshman Achuthan, appeared on CNBC’s Squawk Box this morning to discuss ECRI's near-term and longer-term cyclical outlook. His comments come at the beginning and end of the video segment and are summarized in text below the video.

Summary of ECRI's Key Points:
  • No "double dip" recession
  • “chronically high” jobless rates
  • Clear sailing for first half of 2010
  • Global slowdown in 2h 2010
  • Recessions in next decade will be more frequent.
  • Duration of expansions will be shorter than we are used to
Lakshman was also a guest on Bloomberg TV where he said "buy and hold is dead" due to the frequent recession and recovery cycles. Of course, "core and explore" asset allocation strategies such as mine should prosper in this environment as we take profits when up and buy back when down. For details on how to prosper during a cyclical market that is volatile but goes nowhere, see my article:
Lakshman's summary comments via email:
  • No "new normal" of slow and steady growth! Rather, more frequent recessions ahead A la Japan, 4 recessions in 17 yrs with average expansion less than 3 years.
  • Such an environment is bad for "buy and hold," mentality, but navigable with good leading indexes
  • Frequent recessions = little chance of jobless rate falling back to 2007 lows for many years, maybe decades
  • Key question in investors' minds today is Fed policy timing. The answer will be determined by timing of next downturn. ECRI's leading indexes are designed to anticipate this.
  • Today too soon to tell, but mark my words, there is always another turning points out there, and my guess is we’ll be seeing more of them than we’ve become accustomed to in recent decades.
More information:

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