My Forecast For The First Half Of 2017

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At the outset of every year, I lay out a forecast for each half. My method of forecasting is pretty simple - in fact, by now it is boilerplate. I start each forecast each year the same way.

My method is so simple, I call it the K.I.S.S. method. Even though the Index of Leading Indicators is the statistic most denigrated by Wall Street forecasters, it has the inconvenient habit of being right more often than the highly paid punditocracy, especially at turning points. Since I'm not a highly paid Wall Street pundit, I simply rely upon the LEI for the short term and several methods of looking at long leading indicators for the second half of the year.

I am only discussing the first half of this year in this post.

So, let's look at the Conference Board's Index of Leading indicators, which forecasts growth about 6-8 months out:

From July 2015 through February 2016, the LEI was only positive for 2 months! That's why, together with the effects of the then-strong USD one year ago, I forecast severe weakness, but not quite a recession in the first half of 2016.

This year, the situation is different. There have been only 2 slightly negative readings in the last 7 months, during which time the index is up over 1%. While December hasn't been reported yet, the stock market has made new highs, jobless claims are at their lows, the ISM new orders reading was strongly positive, and motor vehicle sales have set a post-recession record.

All of this says that the first half of 2017 should feature at least reasonably strong growth. Unless the new Administration starts a trade war almost immediately, I do not foresee any political initiatives that will derail this growth before mid-year.

New Deal Democrat, XE.com

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