Forecasting model for the U.S. stock market cycle

The traditional probit modeling approach (see, e.g. Estrella and Mishkin (1998)) is used to estimate the probability of a reversal in the stock market to a bear or a bull market. The stock market, which is benchmarked with the S&P 500 index, is characterised by two phases in the probit model: a bull or a bear market phase. The model includes a number of U.S. economic time series, such as production, the unemployment rate and the inflation rate. The probability of a reversal in the stock market is determined using the following 50% rule. When a bull (bear) market exists, the model predicts a reversal to a bear (bull) market if the probability is equal to or exceeds (falls below) 50%. Otherwise, the model predicts that the bull (bear) market will continue.

Forecasting model for the U.S. business cycle

The traditional static probit modeling approach is also used to estimate the probability of a reversal in the business cycle to a recession or an expansion phase. The business cycle is characterised by two phases in the probit model: expansion or recession. The model includes many U.S. economic time series, such as building permits, initial unemployment claims, consumer sentiment, and the yield curve (long-term interest rate minus short-term interest rate). The probability of a reversal in the business cycle is determined using the following 50% rule. When the economy is an expansion (recession), the model predicts the start of a recession (expansion) if the probability is equals to or exceeds (falls below) 50%.1 Otherwise, the model predicts that the expansion (recession) will continue.

Forecasting Model for the Canadian Business Cycle

The traditional static probit modeling approach is also used to estimate the probability of a reversal in the business cycle to a recession or an expansion phase. The business cycle is characterised by two phases in the probit model: expansion or recession. The model includes many Canadian economic time series, such as building permits, new orders, consumer sentiment, and the yield curve (long-term interest rate minus short-term interest rate). The probability of a reversal in the business cycle is determined using the following 50% rule. When the economy is an expansion (recession), the model predicts the start of a recession (expansion) if the probability is equals to or exceeds (falls below) 50%.1 Otherwise, the model predicts that the expansion (recession) will continue.

Forecasting models for Canadian industrial GDP and employment growth

The models include the main drivers of growth in industrial GDP and employment, notably domestic and foreign demand, the value of the Canadian dollar against the U.S. dollar and the world commodity prices. The annual projections for GDP and employment are updated monthly to take into account the changes in the consensus forecasts for the growth drivers by industry. A key feature of the models is their capacity to explain and predict very well the evolution over the past three decades of the rate of growth in GDP and employment by industry in Canada.

The Forecasting Advisor has prepared a detailed research note for each of the fives models. The detailed research notes provide a brief description of each model and a comprehensive review of the historical predictive performance of each model. The notes are:

  • Forecasting the Stock Market Cycle in the U.S.;
  • Forecasting the Business Cycle in the U.S.;
  • Forecasting the Business Cycle in Canada;
  • Forecasting Canadian Employment by Industry;
  • Forecasting Canadian GDP by Industry.

If you would like to learn more about one, two, three, four, or all the five proprietary models from The Forecasting Advisor, simply fill out the form below and click send. You will always receive a response by the next day.

Detailed research notes request

Forecasting the Stock Market Cycle in the U.S.
Forecasting the Business Cycle in the U.S.
Forecasting the Business Cycle in Canada
Forecasting Canadian Employment by Industry
Forecasting Canadian GDP by Industry

I allow The Forecasting Advisor to send me updates about the products. At any time, you can contact us to be removed from the contact list.

(*) required fields