The coronavirus pandemic is not ‘business as usual’ for humanity or the economy. I have no idea if these forecasts have any validity. 

Forecast April thru September 2020: +38% 
Probably of at least breaking even: 99%+

I have no special knowledge that says whether the current stock market crash and economic recession is actually different from human and economic disasters of the past.  The basic premise of the computer models I track here is that the market will do in the future roughly what it has done in the past — concentrating on a handful of key business and economic variables tracked since 1984.  But, at this point no one really knows what will happen next. Maybe the economy will commence a somewhat typical recovery, or maybe not.

What I think the forecasting models are saying is that six months is a very long time from now. A lot of surprises can and will happen. There is a tremendously powerful driving force for the economy to ‘revert to the mean’, to regain its long term path.  Already governments around the world have shown that they will do ‘all that is necessary’ to support the economy and return things back to normal.  People are clambering to get back to work and restart their normal lives. Eventually things will get better.

I did not believe how positive the models’ current predictions were when I first ran the calculations this month.  News of the pandemic is horribly grim.  We have really just started the economic quarantine process.  Most of the economic harm from shutting down much of the economy has yet to occur.  Things WILL get worse.

I doubted the data that drive the models.  Most of the economic variables that form the basis of the models are still highly positive and don’t reflect the sudden economic damage that is happening right now.  For example, the data I use still see a very low probability of a near term economic recession — that is obviously wrong. Similarly, leading economic indicators are still basically quite positive — wrong.

So, I ran the calculations again, but substituted drastically worse numbers for several economic variables.  This time the forecasts from the models were even more positive! Not what I was expecting. What the models seemed to say is that in ‘usual’ stock market crashes, by the time economic data can reflect just how much devastation has occurred, the stock market is already looking ahead to the coming recovery.

Good luck to all is getting through the near future. Stay safe.

Long Term Trends