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Investment Research Since 1978

You’ve Read the Last Issue of Intelligence Report: MTI and RAGE Gauge

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In case you missed it, here’s what Dick Young wrote in his December 2016 issue of Intelligence Report:

My Revitalized Market Tension Index (MTI)

When will we know that the economy has entered recession? This month, I am reintroducing my Market Tension Index (MTI) to help you and I deter­mine whether the economy is in recession. This will be the first of what are likely to be many more proprietary indicators and tools I plan to roll out to help you become a more comfortable, confident, informed investor.

My revitalized MTI is a composite index of indi­cators that have historically peaked at the onset of recession. I have transformed and adjusted the raw data to provide a reliable signal of when the economy is in recession. Below is a long-term chart of my MTI. The shaded areas indicate periods of recession in the economy.

As you can see in the chart, my MTI begins to fall sharply at the onset of recession. Every drop in the MTI does not signal recession, but every time the MTI drops below -0.65 (the horizontal line on the chart), after a period of economic expansion, you should be confident the economy has entered reces­sion. How confident? Every single recession since 1960 has been associated with an MTI reading below -0.65, with no false signals.

Here’s how Young Research’s MTI looks today (as of 10/31/2017):

 

Like Dick Young, I also provide you with an overall risk perception gauge with my monthly RAGE Gauge. And, as we saw last month, investors’ perception of risk is not nearly as high as it should be. My RAGE Gauge, a measure of risk perception, should be much higher than it is, but the numbers don’t lie—once again, investors aren’t paying attention to RISK.

 

Originally posted on Yoursurvivalguy.com.

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.