It can be easy to conflate the stock market and the economy, and we’ve seen this happen particularly over the past few years with the combination bull market and strong U.S. economy. People have begun to associate them together. But not only are they not the same thing, the relationship between them may not be as straightforward as many people think. Understanding how economic indicators and stock prices are related can be important when it comes to recognizing market opportunities. Particularly as we come to what may be a turn in the market cycle, understanding indicators and what they show us can help us to be prepared.
Stock analysts divide indicators into two main categories as they relate to stock prices and/or the economy:
- Lagging indicators: A measurable economic factor that changes only after the economy has begun to follow a particular pattern or trend
- Leading indicators: Any economic factor that changes before the rest of the economy begins to go in a particular direction
We’d like to extend our best wishes to everyone for the New Year; may 2019 bring you health, happiness, and prosperity. The New Year is a time to both reflect back on the previous year and look ahead as we plan for the coming 12 months. As we look both behind us and forward, we wanted to take a moment to share our thoughts with you. Read more
In 2018, amid denuclearization talks with North Korea and a trade war with China, mid-term elections, spreading cannabis legalization, U.S. withdrawal from the Iran nuclear agreement and the United Nations Human Rights Council, and historic wildfires in California, we saw the first company reach the trillion-dollar valuation mark — that was Apple in August, soon followed by Amazon. The market seemed unstoppable for most of 2018, in spite of volatile world events and a creeping divisiveness at home. We saw the continued rise of the FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google), as they each grew larger than many countries’ entire stock markets, only to see an ensuing fall as investors began to question the ability to maintain their lofty growth trajectories (and avoid regulation). Read more