Are The Bears Wrong? | Lakshman Achuthan

ECRI's business cycle indicators signal 'No Recession' over the coming few quarters

The real money in investing is made by those who perceive what the markets are likely to do tomorrow, and then position themselves today to profit from that future action.

Today's guest, Lakshman Achuthan, co-founded the Economic Cycle Research Institute specifically to identify these key turning points for investors.

Which key turning points are in play right now?

And how can we best take advantage of them?

Perhaps Lakshman’s biggest takeaway from his current indicators is that he doesn’t see a hard landing arriving anytime soon.

He realizes this flies in the face of those concerned about the health of consumers and the labor market. But according to the most important factors he tracks, the economy is still looking surprisingly resilient.

For his reasons why, click here or on the video below:

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Adam’s Notes: Lakshman Achuthan (recorded 9.25.24)

EXECUTIVE SUMMARY:

• Different regions are experiencing varying levels of economic resilience. The U.S. has shown considerable strength, while Europe is facing more pronounced economic slowdown and China appears to be in a world of hurt. Globally inflation may have troughed: Japan has seen inflation beginning to firm after a long period of stagnation and regions like the U.K. and parts of Europe are witnessing early signs of inflation firming again, as well. Lakshman stresses the importance of distinguishing between growth and inflation cycles, as they often get conflated, yet have distinct impacts on financial markets.

• The U.S. economy has shown surprising resilience despite global headwinds. Lakshman notes that the U.S. has been the main driver of the global economy and continues to hold up well, even with decelerating growth. He believes that recent rate cuts will provide additional support for markets in the near term, though any economic boost will come after a lag. However, this resilience isn't guaranteed to last indefinitely, as evolving global factors could still influence its trajectory.

• China faces significant economic challenges, primarily due to its housing market crisis, excess real estate supply, and a business environment that's becoming less conducive to capitalist activities. Lakshman is skeptical that China's recent stimulus efforts will be enough to resolve these structural issues. The country has relied heavily on exports, but with global demand slowing, China may struggle to regain its previous growth momentum, even with aggressive government interventions.

• While the U.S. Federal Reserve has started cutting rates, Lakshman cautions that these cuts may not necessarily prevent inflation from cycling back up in the United States. The forward-looking data that Lakshman tracks shows that while disinflation continues, it may not stay at low levels for long. He argues that central banks should take advantage of the current environment to make rate cuts while they can, as inflation could turn upward again, forcing them to raise rates in response.

• Given the current economic backdrop, Lakshman recommends investors follow a