This visualisation shows smoothed recession probabilities for United States. These are obtained from a dynamic-factor Markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and actual manufacturing and trade sales. This model was originally developed in Chauvet, M., "An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, 1998, 39, 969-996.
Smoothed recession probabilities can be overlayed along with any asset's price data to determine the asset's performance during a recession and otherwise.
An investor can use this dashboard to understand the probability of recession for the U.S. economy and therefore position their investments accordingly.
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