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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (64162)	6/28/2025 4:57:12 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69233

ChatGPT: Test the hypothesis that recessions usually start 6 to 18 months after the fist rate cut by the Federal reserve after a period of extended tightening of interest rates. If true provide a timing model to predict the next recession after the September 2024 rate cut. Provide a train of though to the process. ChatGPT said: Thought for 24 seconds Here’s how we can test and model the “6–18-month lag” hypothesis: 1. Identify Fed “first cuts” after tightening Several well-documented episodes of extended Fed tightening ended, and the Fed then began cutting rates (“first cut”). A convenient summary identifies seven such “loosening cycles” since 1980: October 1984, June 1989, July 1995, September 1998, January 2001, September 2007, and July 2019 treasurefi.com. 2. Match to NBER recession onsets Of those seven cycles, four were followed by NBER-dated recessions: June 1989 cut ? July 1990 recession: lag ˜ 13 months treasurefi.com nber.org January 3 2001 cut ? March 2001 recession: lag ˜ 2 months federalreserve.gov nber.org September 18 2007 cut ? December 2007 recession: lag ˜ 3 months money.cnn.com nber.org July 2019 cut ? February 2020 recession: lag ˜ 7 months cato.org 3. Compute historical lags Lags (in months): {13, 2, 3, 7} Mean ˜ (13 + 7 + 3 + 2) / 4 = 6.25 months Median = (3 + 7)/2 = 5 months Standard deviation ˜ 4.3 months Only two of the four (1989 and 2019) fall within 6–18 months, so the hypothesis holds in 50% of these cases. 4. Fit a simple predictive model A normal approximation based on these four observations: Lag~N(µ=6.25, s=4.3)\text{Lag} \sim \mathcal{N}(\mu=6.25,\ \sigma=4.3)Lag~N(µ=6.25, s=4.3) Truncated at zero, this yields: Point estimate ˜ 6.3 months 68% confidence interval ˜ [2, 10.6] months 95% interval ˜ [0, 14.9] months 5. Apply to the September 2024 first cut Assuming the Fed’s next “first cut” comes in September 2024, our model implies: Most likely recession start: ~6 months later ? March 2025 Reasonable window (68%): between ~November 2024 and July 2025 Full range (95%): up through March 2026, though with rapidly diminishing probability beyond mid-2025 Conclusion: Historically the 6–18 month rule only held half the time; actual lags have ranged from 2 to 13 months with an average near 6 months. Accordingly, if September 2024 marks the first Fed cut, our timing model points to around March 2025 for a recession onset (±4 months), rather than as late as September 2025 or beyond. Sources