Following the Lead—Economic Indicators Point UpwardsSheaff Briefs Editor
The economy, like the scenery on a car trip, can be viewed through the windshield, the rearview mirror, or the side window, Investopedia explains. Leading indicators are pieces of data which economists see as they look through “the windshield” at the economy, using those indicators to help predict the future direction of the markets.
Examples of economic indicators include:
- current stock prices
- stock futures
- bond and mortgage interest rates
- the yield curve
- foreign exchange rates
- commodity prices (gold, grains, oil, metals)
- unemployment figures
Who uses leading indicators to help make decisions? Federal policymakers, business owners, and investors all use the indicators as guidelines in decision-making.
What makes an economic indicator “leading”? 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 David Gilreath discussed leading indicators in a recent month’s 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 downward movement so far.
While the topic of tariffs has taken up significant air time, even causing some market volatility, Gilreath notes that the positive effects of the tax cut have significantly outweighed concern over the cost of tariffs.
Take a look through your windshield and follow the lead—those economic indicators have been pointing upwards!