Credit Markets Are A Better Way To Anticipate Economic Downturns: McKinsey Quarterly

From October 2010 McKinsey Quarterly, "A better way to anticipate downturns: Credit markets, though harder to follow than equity markets, provide clearer signs of looming economic decline." by Tim Koller:

And while the savviest executives and investors know better than to get caught up in the short-term fluctuations of the economy, many others, looking for evidence of longer-term trends, still fixate on movements in the equity markets.

They shouldn’t. The fact is that those markets, well analyzed as they are, don’t predict downturns effectively. Credit markets are a better place to look for signs of impending trouble, in no small part because they have been at the core of most financial crises and recessions for hundreds of years.

Read the complete McKinsey article here.