NEWS BEFORE THE NEWS
National average precipitation is an accurate indicator of the economy. It is often a ‘leading indicator’ of what is to come. Wet trends correspond with bull markets and a growing economy. Dry trends correspond with bear markets and a shrinking economy.
Notice in the graph the wet 1990s when the stock market was roaring. The weather turned dry in 1996 and reached a drought bottom in 2000. The stock market promptly crashed in 2001. 2001 and 2002 were wetter than 1999 and 2000 but still not moist enough to regenerate the economy. 2003 continued the wet trend and 2004 witnessed a precipitation high. The stock market responded favorably to this wet trend. 2005 and 2006 were drier than 2004 but the stock market weathered this warning until ultra-dry 2007 ushered in The Great Recession beginning in October.
2008 and 2009 were both wet years indicating the slow rise in stock prices but 2010, 2011, and 2012 were dry again. 2012 was the driest year since 1988. This offers an explanation for the shaky and long economic recovery after the Great Recession. Precipitation as a leading economic indicator pointed to a continued grim economic picture through 2012. The stock market did rally during this period but the overall economy remained mired in high unemployment – millions of workers have even given up trying to get a job – and 22% of citizens are on food stamps.
2013, however, reverses the short dry trend with dramatic exceptions in parts of the Southwest and particularly California, a major world food producer. 2014 was favorable for the economy as forecast last year based on the precipitation index. Notice that precipitation dipped slightly in 2014 and then soared in 2015. 2015 was a very wet year. The stock market responded by posting the highest gain ever but retreated from this record by years’ end. Extremely wet 2015 is a good sign that the economy will dramatically improve as crop yields flourish from 2015-2019.
2016 was indeed a good year for the stock market. The economy rose to 2.8% GDP, the best year in President Obama’s tenure. 2016 was drier than the preceding year but precipitation still remains relatively high on average (note trend line). Expectations are mixed that President Trump will deliver on his promise to stimulate the economy. Nevertheless, his cabinet picks are all successful leaders in their field. It is likely then that Trump will continue to surprise critics and drive the market higher. The downturn in precipitation, however, does point to a market correction as jittery investors adjust to the proclivities of the new administration.
The second graph depicts the precipitation cycle since detailed records were recorded. Pay attention to the peaks and troughs of the black trend line (5-year moving average)
THE HISTORICAL RECORD
The Gilded Age of the 1890s and early 1900s was a boom time for industrial production and investment tycoons but not so for the average worker. The first trend peak (high) was in 1908 followed by three mediocre rises and falls centered in 1912 (low), 1915 (high), 1919 (low), 1923 (high), 1925 (low), and finally the high of 1929. World War I and its aftermath, plus Prohibition and the “Roaring ‘20s” followed this seesaw pattern. Notice the very dry 1930s that gave rise to the Dust Bowl, the Great Depression, and the rise of fascism. Wet conditions peaked again in 1947 showing the productivity of World War II and the resulting prosperity. The sharp dry trend bottom in 1956 corresponded with the Cold War and the Eisenhower presidency. Just as quickly as it became notably dry a turn to wetter conditions appeared in the trend peak of 1960, marking the end of a golden era and the beginning of the young JFK presidency. The trough in 1966 brought civil unrest, the Vietnam War, staggering economic debt, a counter-culture revolution, the assassination of JFK, the Johnson administration’s Great Society, and the rise and fall of Nixon. The peak in 1975 correlated with the end of the unpopular Vietnam War and some prosperity before the War Recession and the 1978 trough. The following peak in 1984 came during the prosperous and exuberant Reagan years. The next dry trough in 1989 produced Black Monday on Wall Street – October 19, 1987. The beginning of a long and questionable entanglement in the Middle East started in this dry period during the first Gulf War (George H.W. Bush administration). The 1990s, centering on the wet trend peak in 1998, was a decade of decadence and amazing prosperity during the first “Baby Boom” president, Bill Clinton. The War on Terrorism after the 9/11 attacks correlated with the dry trough of 2002 and more economic instability.
It is apparent from the historical overview of precipitation that prosperity and good times prevail during wet trends. Dry periods depress the economy and mire the country into wars, civil unrest, and poor policies.
The average precipitation is 29.14 inches. The previous high of 2005-2010 was above average but the long trend is heading drier, the peak of 1998 being wetter than the peak of 2009. The period 2005-2010 is more like the 1940s, right before a very sharp or prolonged dry spell and corresponding economic depression. Walla, the 2008 Great Recession began. 2015, however, represents a transition toward wet conditions. Previous sharp turns in the data repeatedly mark longer wet or dry periods. It appears from the record that we can expect a return to wet conditions for the next several years driven by wet 2015.
Precipitation and temperature records show distinct 100-year, 500-year, and 1,000-year grand cycles. In any given 100-year cycle, precipitation and temperature alternate in phases from cold-dry, warm-dry, warm-wet, hot-dry, cold-wet, then cold-dry again. The periods between cold-dry peaks in the long-term climate record average 94.6 years. There have been 27 cycles between 575 B.C. and 1865. Each cold-dry period has been during a pivotal time in history. The 28th cycle began in 1976, another epoch time in history. The year 2000 may mark the warm-dry phase of cycle 28. The next peak of the warm-wet phase is expected near 2021 but may have started in 2015.
Warm-dry, and especially the hot-dry transition, are difficult times economically. In terms of world leaders, 90.6% of the greatest heads of state rule during the warm-wet and cold-dry phases. The warm-wet phases also tend to be times of prosperity and beneficial social developments. The last warm-wet peak was 1925.
 GDP failed to perform above 3% per year in the entire eight years of President Obama’s administration. The last time the GDP was above 3% was in 2005.