Navigating Equities After a Financial Crisis

I am very pleased to introduce Lakshman Achuthan to TBP readers.

Lakshman Achuthan is co-founder and managing director of the Economic Cycle Research Institute (ECRI), an independent organization focused on business cycle analysis and forecasting in the tradition established by ECRI’s co-founder, Geoffrey H. Moore. ECRI maintains business cycle chronologies for 20 countries around the world other than the U.S. Lakshman is the managing editor of ECRI’s forecasting publications and regularly participates in a wide range of public economic discussions.

He is a member of Time magazine’s board of economists, the New York City Economic Advisory Panel and serves as trustee on a number of non-profit boards. Lakshman is the co-author of Beating the Business Cycle: How to Predict and Profit from Turning Points in the Economy.


There is virtually a one-to-one correspondence between stock price cycles and U.S. growth rate cycles, which the growth rates of ECRI’s leading indexes are designed to anticipate. Thus, there should be a historical correspondence among cycles in these leading index growth rates and stock price cycles. Their precise relationship around business cycle recoveries is of particular importance, as it offers clues to the timing of cyclical upturns in stock prices.

We zero in on the historical patterns of the U.S. Long Leading Index (USLLI) and Weekly Leading Index (WLI) growth rates, juxtaposing them against stock prices around individual business cycle recoveries (charts not shown). Stock price upturns are lined up against USLLI growth starting in 1920 and also against WLI growth from 1949.

The historical charts reveal consistent sequential patterns, providing definitive indications about the timing of bull markets that begin during recessions (chart below updated on April 3, 2009).


ECRI Leading Indicators & Stock Prices

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