Macroeconomic Indicators

Macroeconomic Indicators


Macroeconomic indicators are statistics that indicate the current status of the economy of a state depending on a particular area of the economy (industry, labor market, trade, etc.). They are published regularly at a certain time by governmental agencies and the private sector.

The main point is to get a grasp into the relationship between the macroeconomy and financial markets and the value of equities. Before analyzing individual stocks, it is important to understand the strength and resiliency of the economy. For instance, if macroeconomic indicators suggest that economic growth is contracting and prices do not fully reflect the slowing economy impact on profits, a portfolio cash position should be increased or sector rotation may be considered. Indeed, the results of a macro analysis are employed to identify the current stage of the business cycle for the reason research shows that stocks tend to lead the economy by approximately six to nine months on average.

macroeconomic indicators

Most indicators are available for free from the Federal Reserve Economic Data (FRED) database. The Conference Board indicators can be grouped depending on their forecast type:

  • Leading Indicators thought to change in advance of economic conditions and used for forecasting the future strength and direction of the business cycle.
  • Coincident indicators thought to change in sync with economic conditions and used for interpreting current economic strength or weakness.
  • Lagging indicators thought to change after changes in economic conditions and used for corroborating that the economy has been expanding or contracting in accordance with already formed expectations.

The Manufacturing ISM Report

The Manufacturing ISM Report is a survey report based on data provided by supply executives showing the percentage reporting each response, the net difference (positive or negative), and the diffusion index.

Relevant Posts and Pages


Safe Heaven Portfolio Analysis

Safe Heaven Portfolio Analysis

Safe heaven portfolio can be a wise option considering 2019 marks the 11th year to an already-extended bull market which started in in the aftermath of the great financial crisis. It has been a long and very rewarding run for all investors… Especially REIT investors who have continued their long streak of market outperformance. Since we are likely to hit a recession sooner rather than later (1-2 years), tracking a safe heaven portfolio is important.

Financial Constraints on Inventory Investment

Financial Constraints on Inventory Investment

Inventories have been studied by macro-economist for their role in the business cycles (Abramovitz 1950) and their relation with corporate profits (Mitchell 1951, Lucas 1977) and with the volatility of cash flows (Fazzari, Hubbard et al. 1988), both key leading indicators of the state of the economy (Carpenter, Fazzari et al. 1994); other evidence suggests their implications on the general level of the economy in case of financial shocks because of erroneous forecasts (Bernanke and Gertler 1989, Bernanke, Gertler et al. 1996) or their limited efficiency in collateralization (Berk 2014).

Guessing Market Cycles

Guessing Market Cycles

Market cycles can be analized through the formation of bubbles consisting of four phases: Accumulation, Mark-Up, Distribution, and Mark-Down. Usually, accumulation coincides with the early stages of recovery, mark-up with the consolidation of the economic condition leading to a bullish sentiment, distribution substantially with lateral movements and indecision in market sentiment, and mark-down with the early stages of mid recession.

Oil Correlations with Commodity Currencies

Oil Correlations with Commodity Currencies

Currencies move with supply and demand, politics, interest rates, speculation, and GDP. Thus, whenever growth in a country is mainly commanded by commodities exports, some currencies are generally correlated with commodity prices. Major commodity currencies include the Australian Dollar, the New Zealand Dollar, the Canadian Dollar, the Japanese Yen, and the Swiss Franc. Minor currencies include the Russian Ruble, the Colombian Peso, and the Peruvian Sol.

Lagging Indicators

Lagging Indicators

Lagging indicators represent financial signs that becomes apparent only after a large economic shift has taken place. Such indicators are used to confirm the recent strength or weakness of economic activity. The Conference Board Lagging Index generally reacts after the start of recessions and expansions.


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