By Jack N., Communications Analyst and Blog Contributor
I’ve been investing for so long, I remember when ticker tape was a real thing, with real stock symbols and numbers on it. What I’ve learned can be summed up this way: Trust the numbers, not the noise.
Until a week ago, the noise was all about the fiscal cliff. And now that it’s been averted, the focus is on the next fiscal cliff, or congressional stalemate. I believed that the last fiscal cliff was going to be resolved and so will the next one and the next, and so on. These events seem urgent and important today, but are likely to turn out to be trivial through the prism of time. In general, they’re distractions that can toy with your fears and get you to lose trading and investing discipline.
That’s why I look to the numbers to help me decide how to invest. So what numbers do I think are more indicative than endless political wrangling? Here are six.
Durable Goods Orders
Durable goods are large items, like machinery and equipment, typically purchased by businesses to either replace existing durable goods or to expand their businesses. The Commerce Department reported that durable goods orders rose 0.7 percent in November, and it revised the October figure upward to 1.1 percent from 0.5 percent. Economists polled by MarketWatch were expecting an increase of 0.1 percent in November. Some observers were concerned that companies were cutting back their investments over concern about the fiscal cliff. But that certainly wasn’t the case in October and November.
Household purchases make up about 70 percent of U.S. gross domestic product. And when consumers make more money, they spend more, which, in a simplistic nutshell, is how the economy grows. The Commerce Department reported that personal income rose 0.6 percent in November, well ahead of the expected 0.4 percent increase by economists polled by MarketWatch.
Hiring is on the rise in the United States, and that is good news for the economy and usually for the markets. The unemployment rate today stands at 7.8 percent, versus 8.5 percent in December 2011. If you exclude teenagers, most of whom are not considered breadwinners, the unemployment rate for adult men has shrunk to 7.2 percent and 7.3 percent for adult women. In all, 2.4 million more Americans were employed in December 2012 than December 2011, according to the Commerce Department’s Bureau of Labor Statistics.
When housing prices collapsed in the mid-2000s, the economy was crushed. But prices are now on the rise, according to the S&P/Case-Shiller Index, and sales of new and existing homes continue to rise as well. When housing prices increase, it can make homeowners feel wealthier, which also can spur consumer spending.
Gross Domestic Product
The U.S. economy is growing. I’m not saying that a 3.1 percent annualized GDP growth rate is robust, at least compared to China’s standards (projected to be 8.1 percent in 2013, according to a Chinese think tank). But the Commerce Department revised the third quarter gross domestic product upward and ahead of the 2.9 percent expectation by economists polled by MarketWatch.
Consumer Price Index
Inflation remains so tame, as to be virtually non-existent. In fact, the consumer price index declined in November to 0.3 percent, according to Department of Labor. Most of that was the result of falling gasoline prices, but even excluding food and energy (which tend to be volatile), the increase was a mere 0.1 percent.
So recapping: We have a growing economy, rising employment, improving housing conditions, businesses investing in durable goods and inflation that appears to be subdued. As you’re evaluating what to do with your investment portfolio or your trades, it might be a good idea to turn down the noise, and tune in to the numbers.
|Economic Data||Reporting Agency||Typically Reported|
|Employment Situation||U.S. Bureau of Labor Statistics||First Friday of the Month|
|Durable Goods||U.S. Census Bureau||End of the Month|
|Gross Domestic Product||U.S. Bureau of Economic Analysis||End of the Month|
|S&P/Case Shiller Index||Standard & Poor’s||Last Tuesday of the Month|
|Personal Income||U.S. Bureau of Economic Analysis||End of the Month|
|Existing Home Sales||National Association of Realtors||Late Month, Prior to New Home Sales|
|New Homes Sales||U.S. Census Bureau||Late Month, After Existing Home Sales|
|Consumer Price Index (inflation)||U.S. Bureau of Labor Statistics||Mid-Month|
Some of the economic data above is available to Scottrade clients. When logged in, visit the Quotes & Research section, choose Market Calendar and then Economics.
What key numbers do you focus on when making investing and trading decisions?
Also of Interest:
Jack N. is a communications analyst at Scottrade. He works to demystify the markets and the economy for all types of investors and traders.
Commentary and opinions expressed are those of the author/speaker and not necessarily those of Scottrade. Scottrade does not guarantee the accuracy of, or endorse, the views or opinions of guest speaker, commentator, or author.