Recession Probability Analytics (RPA) are quantitative, completely mechanical and emotion free ways of looking at the strength of the US Economy.  When the reading is high it warns of coming slow downs and serves as a warning sign to investors.  While its use is flexible, it is generally a good idea to use caution when investing in higher risk US assets such as stocks and high yield bonds when the reading is in red.  Keep in mind that investing carries risk and this indicator does not guarantee against loss.  It is also not a recommendation or investment advice.  You should always consult with your own financial advisor to consider your goals, tolerance for risk, and financial condition before making any investment decisions.

When the indicator reads above 50 we feel there is a high probability the US Economy will worsen in the following month and therefore stocks should be invested in with caution.  Generally, when this occurs we reduce stock exposure by 50% on our FormulaFolio Investment Strategies.

When the indicator falls below 45 after being above 50 we invest fully per our FormulaFolio Investment Strategy models.  This is also our method of investing when the indicator is below 50 when the subsequent months reading was below 50.