No FOMC Member Sees Downside Risk to the Economy — But Historical Forecast Accuracy Is Questionable
nashnova research
Zero FOMC members flagged downside risk at the September meeting — the most optimistic reading in 14 years. Yet historical data shows this kind of unanimous confidence has preceded economic slowdowns far more often than it has preceded strength.
How rare is a "zero downside risk" reading?
Apollo chief economist Torsten Slok charted the data: at the September FOMC meeting, not a single member marked the economy as facing downside risk.
It is the most optimistic reading on this metric in nearly 14 years.
This means → confidence inside the Fed has hit an extreme — everyone is on the same side of the call.
Does this kind of unanimity actually predict anything?
Analyst Lance Roberts of RealInvestmentAdvice reviewed the record since 2012: FOMC sentiment hit four major turning points, and in 7 out of 8 cases, economic growth slowed within the following six months.
Extend the window to 12 months and the signal drops to coin-flip odds — half the time growth strengthens, half the time it weakens.
In plain terms = peak Fed optimism has been a reliable six-month contrarian signal, but beyond that horizon, it tells you almost nothing.
Has this gone wrong before?
Roberts points to January 2021: only one FOMC member saw upside risk to inflation at that meeting.
Supply-demand mismatches were already visible across multiple sectors. Inflation then massively overshot expectations.
This reflects a pattern where the Fed's collective judgment can miss the turn — even when the signals are already showing up in the data.
What is "Farrell's Rule #9"?
Roberts invokes the classic investing maxim — Bob Farrell's Rule #9: when all experts and forecasts agree, something else is going to happen.
This means → the FOMC's current zero-risk assessment is, by this heuristic, exactly the moment to raise your guard.
Put simply = it doesn't mean the economy will definitely stumble — but "nobody is worried" is itself, historically, a contrarian indicator.
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