Signals And Confirmation Of Deep Recession 2020

April 30, 2020

Deep Recession is here!

This morning, the 1st quarter GDP number showed an unexpected large drop of -4.8% and with guidance of further large drop of -27.7%.  This two quarter drops officially define a deep recession in 2020.

Of course, we tend to blame on the global corona virus Covid-19 pandemic disastrous event.  This virus started in late 2019 is truly one of our life’s most significant events.  It will take long time for us to recover.   However we strongly believe the seeds of a deep recession were sown long time ago.   Indeed we published articles here in 2016 forecasting the impending recession in the current period.   In this article, we discuss following two main topics:

  • Past Signals indicating current recession/depression
  • Forecasting future Equity Market DOW and Hard Asset GOLD prices

The following chart showed confirmation of current deep recession for past 12 years

Chart 1 – Confirmation of Deep Recession

Signals from Past Analyses

In this section, we repeat some of our previous analysis in forecasting recession.

The important points to note:

  • Equity market tops are a good leading indicator for recession.
  • Gold prices thrive in recession.

Chart 2 – Recession Forecast Chart in 2016

Another interesting observation:  the Gold-to-Silver (GSR) usually tops during recession, as shown in the following chart covering 100 years. Current high GSR is unprecedented!

Chart 3 – Recent Recession Forecast Chart in 2020

Forecasting DOW and GOLD Prices

The following two charts represent a likely path for DOW and GOLD prices for the next 3-4 years.  The DOW forecast chart was based on a recent Youtube video.  The GOLD forecast chart was taken from our earlier analysis.

Chart 4 – Likely Path for DOW: 2020 - 2023

Chart 5 – Likely Path for GOLD: 2020 - 2024

This is an old chart.  In our opinion, the forecasts are still valid.

Summary

We believe in Adam Smith’s concept of The Invisible Hand in shaping the world economy.  Covid-19 pandemic will pass with time, as with other disastrous events in history e.g. WW1, WW2.  We further believe that The Invisible Hand will be the source of all events in the universe: past, present and future.  As intelligent individuals, we have  to adapt to the current events.  Joyful sunshine is awaiting us.

We are not certified or qualified financial advisors.  Please consult your certified financial advisors for actual trading and investing.

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F.T. Dao is a private investor and recently left the corporate world for technical analysis of stock markets.  He holds a PhD degree in physics and has done technical analysis of the market on the side for many years.  He welcomes constructive discussion and can be reached at:  [email protected]  , [email protected]


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