TheStockAdvisor Advice

Economic Indicators - The What, Where, When and Why and the Who to?

As mysterious as equity investment can often be, the practice actually has a basis in economic reality. Just as the performance of individual companies is dependent on the business outlook and progress of that enterprise,. So too the overall trend of the stock market or its components, is a reflection of the general business outlook for the economy or for a particular industry.

While this might be simple enough to say, it is not possible to track performance of individual companies or industries unless one has meaningful data with which to make intelligent appraisals. While in the case of a particular company, one will utilize sales and earnings performance to measure its growth, the future performance will also depend upon sales forecasts and the outlook for the industry.

To develop meaningful forecasts on the future outlook for the economy requires solid economic data on a large number of financial components. This data will provide detailed figures on how the economy is performing on an ongoing basis and provide enough statistical evidence to extrapolate likely performance in the future. While one often hears talks from forecasters referring to "the view from their crystal balls," the fact is that these forecasts are not an effort at some "hocus pocus," but are based on extended economic models and prior performance. However, in the final analysis, even the best forecasts are projections and not statement of actual fact.

With this report, we will begin a series of article explaining the various statistical series that are reported by various government agencies as well as private trade groups and economic groups. We will attempt to provide some insight into the data and what the significance of the report is. We will not be attempting to provide any forecasts of where any of the individual indicators are headed.

Some of the key indicators we will cover are the Producer and Consumer Price Reports, Unemployment Report and Average Hourly Wages and Average Work Week. Retail Sales, Housing Starts, Building Permits, Industrial Production, Durable Goods Orders, GDP Numbers, Trade Deficit, Index of Leading Economic Indicators, Employment Cost Index, API Data, Weekly Jobless Claims Report, Help Wanted Index, Consumer Confidence, BTM Schroders, LJR Redbook, Beige Book, Regional Federal Reserve Business Conditions Reports, University of Michigan Sentiment Survey, Purchasing Managers Reports and others.

The purpose of these reports will be to provide the reader with the knowledge to look at these data in an educated manner and use them to help chart a successful investment program.

Nevertheless, it must still be stressed that trading in equities is still fraught with risk. Being an educated investor provides some basis for limiting risk, but there are always factors influencing individual investments that cannot be forecasted. In addition, there are often fresh market developments that burst upon the scene in totally unexpected fashion. These may have a profound impact of equity prices over the short or long term. In many cases such developments are totally unexpected, although with hindsight the forces that led up to the event becomes more visible.

This is a lesson in itself. Observing the past and assimilating the information provided , recognizing the emerging trends and patterns is perhaps one of the best ways to succeed, or to at least anticipate the future. As a wise man once said, "He who does not learn from the past, is doomed to repeat it." In stock market parlance this can probably be translated as, if you're repeating the past, you,re probably not reaping the future rewards.

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