Indicate to Your Clients—Economic Indicators Point UpwardsAdvice to the Advisor
Leading indicators, those pieces of data economists view looking forward “through the windshield,” continue in an upward trend.
In addition to stock market and interest rate data, economic indicators include:
- real gross domestic product (GDP)
- money supply
- stock futures
- the Consumer Price Index
- the Producer Price Index
- current employment
Much of the data for economic indicators is compiled by:
- the Conference Board’s Consumer Research Center
- the U.S. Department of Labor’s Bureau of Labor Statistics
- the U.S. Census Bureau
Who uses leading indicators to help make decisions? Federal policymakers, business owners, and investors all use the indicators as guidelines in decision-making.
In explaining to clients what makes an economic indicator “leading,” a simple construct is that leading indicators tend to change before the economy starts to follow a particular pattern, and are therefore used to gain a sense of which way the economy is headed. Just looking at these measures at any one point in time isn’t meaningful, however. Charting the history of indexes over time puts today’s information in context.
Sheaff Brock Managing Director Dave Gilreath discussed leading indicators in the recent 2018 Market Update Knowledge Builder webinar. Since 2009, Gilreath emphasized, the leading indicators have shown an almost straight upwards path. Typically, in the weeks and months prior to a recession, these leading indicators fall, but there has been no sign of such a downward movement.
While the topic of tariffs has taken up significant air time, in fact causing some market volatility, Gilreath notes, the positive effects of the tax cut have significantly outweighed any concern over the cost of tariffs. Repatriation of funds has had a major positive impact on the U.S. economy as well, with many of the trillions of dollars of corporate profits that had been sitting in foreign bank accounts beginning to flow back into the United States. The combined effect of that inflow of cash and the benefits to business and individuals of the new tax law has all but eclipsed any significant effect of tariff fears.
Encourage your clients to “take a look through your windshield”—those economic indicators have been pointing upwards!