The path to financial freedom and improved quality of life goes hand in hand with winning back the time to do the things you like. Clients often don’t have the time to keep track of all the economic figures to help them decide whether to be invested in the market or not, or how much to be invested. That’s why they hire me. They trade for time so their days can be better spent on things that are more meaningful and matter more to them.
These are some of the economic statistics and indicators I’m watching out for to help me better assess the direction of the economy, and by extension, the underlying factors that drive the upward and downward movement of the stock and bond markets. These graphs in the aggregate can help tell the tale pretty well for how risks are developing in various sectors of the economy. Some of these had some amazingly accurate signals for the beginning and end of the last few bull/bear markets.
Employment, Hours, and Earnings from the Current Employment Statistics survey (National)
Labor Market Conditions Index
Delinquency Rate on Commercial and Industrial Loans, All Commercial Banks (DRBLACBS)
Delinquency Rate on Single-Family Residential Mortgages
Delinquency Rate on Credit Card Loans, All Commercial Banks
Total Construction Spending (TTLCONS)
All Employees: Total Nonfarm Payrolls (PAYEMS)
Real Retail and Food Services Sales (RRSFS)
Industrial Production Index (INDPRO)
Fixed Private Investment (FPI)
Real Private Nonresidential Fixed Investment (PNFIC96)
Federal Reserve Banks: Total Assets vs. S&P 500 Index
Loan Loss Reserves to Total Loans
Continued Claims (Insured Unemployment)
Overall, while trends remain positive, they are starting to soften, and suggest we are more likely approaching a peak stage of the economy instead of one that is about to burst into a new and renewed era of growth, which is what the stock market is signaling with its breakout to new highs. The economic data leave us skeptical of this advance, but as long as the data remain positive, we remain invested, albeit at conservative allocations.
We do all this so we can help clients avoid the majority of the damage that can be inflicted by the next bear market, whenever that may be. And for people who’ve forgotten what bear markets look like (and it’s easy to forget when you’re living through the second longest bull market in US history), here’s a great article that shows what it’s like for the rest of the world:
Bear Meets World
Rainier Trinidad, CFA
San Diego and Coronado’s Fiduciary Financial Advisor
Parabolic Asset Management
206 J Avenue
Coronado, CA 92118
Investment Risk Disclaimers: (i) Investments involve risk and are not guaranteed to appreciate, and (ii) Past performance is no guarantee of future results.