Newspaper article THE JOURNAL RECORD

No Certainty More Defined Than Cyclical Nature of Economy

Newspaper article THE JOURNAL RECORD

No Certainty More Defined Than Cyclical Nature of Economy

Article excerpt

Of all the economic certainties none is more definite and pronounced than the cyclical nature of the economy. It rises and falls, ascends and descends, expands and contracts, inflates and deflates.

Any chart of economic activity anywhere in the developed world shows this to be so. Any graph of economic activity is drawn by a quivering needle. Any written history of economic growth devotes pages to descriptions of valleys.

And so, after five years of unprecedented expansion and stock market growth, the question is how much higher can the mountain be before the great valley comes into view?

How deep and how wide will it be?

The most unusual and pleasant response is that we may already have been through the valley without even knowing it. So gentle was the descent, so brief the time involved, that only in retrospect can we be certain we were there.

That is the perspective of Edward Yardeni of Prudential-Bache Securities Inc., who now reports confidently that a new economic recovery, for investment purposes at least, is well under way.

For investment purposes, he says, ``money managers should pretend that the economy fell into a recession from mid-1984 to mid-1986 and that the economy started to recover during the second half of 1986.''

That assumption having been made, a money manager is then relieved of anxiety over the big questions of when will the market fall and how deeply. Doesn't everyone know a recession clears the way for a subsequent advance?

Yardni is serious about his assumption, and he offers this market evidence:

1. An index of 13 raw industrial commodity prices fell close to 30 percent from March 1984 to August 1986, and then soared 36 percent. …

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