DISCLOSURE MUST READ

The following Series of graphs and comments were made entirely by myself for my own interest. No editing has been made from the original in 2019.

The context for why this was made:

In the summer of 2019 there were a lot of murmurs of an upcoming recession. My friend who was teaching me to trade stocks did not believe the news articles but I thought they had some merit. I set out to analyze some graphs and see whether or not we were in the beginning of a recession or when one will occur. I found that there was no immediate risk of a recession but it would be likely for one to occur in the beginning to middle of 2020. I also set a few numbers that must be hit for a recession to be predicted. I also wanted to see if the recession would be a result of a economic slowdown in China which I state in the second conclusion.

With or without Covid-19 there would have been a severe slowdown in the market around the time I predicted.

This is my train of thought and not indicative of my true writing style.

DISCLOSURE MUST READ

Potential of an Upcoming Recession

Unemployment rate of the us

2006 was minimum 2008 was max

1-2 years delayed. Unemployment artificially low?

Unemployment rate of china

Fake data wouldn't be surprised if it's the opposite in 2007-2008

Interest rate of the us

2007 was max, 2009 is dropped to 0, 2016 started increasing

Interest rates are at trend line downwards. Interest rates started lowering as the recession was starting, kept on decreasing to 0 as recession went on. Reactionary.

Expect interest rates to fall .5-1% as the trend line is followed. Was too low for too long.

Interest rate of china

2008 was max, 2009-2011 lowered a lot

Interests rates remained constant at 7.? As the recession started in us. Fell to low point as recession finished. Started to increase in 2011. Started falling in 2015-2016, not reactionary like previously. May tell the future?

Housing starts of the US

2006 was max, 2008 was minimum

Predicted the recession by approximately 1 year. Also ended 1 year before the recession ended. Good indicator

If housing starts fall below 1100 or 1000 SELL Recession happening in exactly 1 year.

Housing starts of china

2008-2009 was lowest, continuation from 2011-2018. Market stagnant

During recession peak, housing starts fell dramatically. Coincident. Recovered much faster in 2009-2010. Seems artificial, fell to recession levels in 2010 and has been consolidating for past 8 years. Only goes up when government makes a new subsidy? Artificial and stagnant.

Month/ year that 2008 recession housing bubble happened

December 2007-june 2009

List of all recessions in the US

Average of 56 months between recession, 4 years 8 months. Max of 10 years, minimum of 1 year. It has been 10 years and 1 month.

Unemployment rate of the united states

Beginning to mid-2018, the unemployment trend rose above downward trend.

This means there is a high chance of a new recession from beginning of 2019 to mid-2020 leaving things current and assuming that the trend drawn is accurate.

There is consolidation for the past 2 years. This is bad news. It has hit the same peak of ~1200 and has stopped continuing upwards. Market is not in recession, nor is it in growth.

Unemployment rate since 1929

Conclusion of recession in America

There are new policies which are now being considered. Instead of waiting for a recession to happen and changing the interest levels coincidentally, there is now a possibility that the us will drop the interest rates down to the trend line and a recession is either made less serious or does not happen for a period of time. Ignoring this possibly, the data does not have any good results. New housing starts have remained stagnant (like in a price channel) for the past three years. This doesn't bode well as they are already significantly lower than they previously in 2007. Interest rates are above the downward trend line. Also, unemployment has risen up past the trend line. The important question here is why, the lowest employment has ever been was 1.2% in 1944 (near end of WW2) so we can assume for now that the absolute minimum is 1.2% as there must always be a certain level of unemployment. Unemployment levels lower than 4 percent result in difficulties of companies to find workers so there is a possibility that below 4 %. Therefore, it is unlikely that unemployment will fall without a large influence by the government. Due to this fact, employment will likely remain in the same area until it goes up thanks to the next recession. The past 6/8 recessions occurred within one percent of 4% unemployment. Also looking at the data since the great depression, the longest period without a recession was 10 years. We are currently at 10 years and 1 month since the previous recession.

To prevent a recession or lower its impact, the interest rates must fall .5-1% and steadily lower over the next few years.

If one or more of the following occurs a recession will occur.

If housing starts fall below 1100 or 1000 SELL Recession happening in exactly 1 year.

If the unemployment rate rises to above 4%.

If the interest rate does not decrease with 6 months.

If/When the above happen there will be an official recession in approximately 1 year. This means there is a high chance of a new recession from beginning of 2020 to mid-2020 leaving all current things current.

Conclusion of recession in China

It is extremely difficult to predict for a recession in china. This is due to the fact that a majority of the data is doctored at the local level. The central government in China sets goals to each of their providences of GDP, unemployment and other key factors. These are extremely difficult to meet and maintain which results in peaks which are overexaggerated and valleys which are underreported. As a result, the only consistent data point is the interest rate as all the other data points cannot be trusted fully but should be taken into consideration.

In 2009 following the recession in America, the percentage change of house starts increased dramatically. This is due to a governmental policy and was therefore was overextended. After this policy, the new housing starts collapsed and has been in a sort of price channel for the past 8 years. This can mean two things, either the Chinese government is manually keeping the level of new housing starts more stable, or this is the natural rate and will eventually fall further down. The first option is more likely.

Unemployment has reportedly "started falling" for little to no reason after a large period of steadiness. The interest rate has remained constant at around 4%. Based off this data, I estimate a recession to be much further away then I previously expected. There is a decent amount of interest that the government can lower and thanks to the integration of private companies and the government, the Chinese can have a more effective, immediate and less costly method of preventing a recession. Any fall in housing starts or transactions, the government will subsidize almost immediately and can prevent a recession. Alone, they will likely have a recession within the next 2-5 years. If the US or other countries go into a recession earlier, this can cause a recession as china is now more connected trade wise to the work than it was in 2008.