A new study from the MIT Sloan School of Management and State Street Associates indicates that there is a 70 percent chance of a recession in the next six months ahead of the 2020 U.S. presidential election.
The researchers analyzed four market factors including industrial production, stock market return, the slope of the yield curve and non-farm payrolls, all on a monthly basis.
Afterward, they measured how the current relationship between the four metrics compared to historical readings.
They said, looking at data going back to 1916, that the index was a very reliable recession indicator, given that it raised leading to prior recessions.
According to their findings, when the index topped 70 percent, the likelihood of a recession rose in the next six months. In November 2019, the reading on the index was 76 percent.
However, some economic indicators suggest that the economy is doing well and many Wall Street strategists are forecasting gains for this year.
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“The fundamental backdrop is supportive, in our view, and the fallout from the outbreak is unlikely to hurt [economic] activity prints over the medium term,” Mislav Matejka, JPMorgan’s head of global and European equity strategy, said in a note on Feb. 3.
“Our call remains that one should not expect a U.S. recession ahead of presidential elections,” Matejka added.
