Tom Explains Market Indicators
Transcript:
Easan Arulanantham:
So you talked about indicators can kind of give a basic understanding of what’s like a leading versus like a lagging indicator.
Tom Vaughan:
Yeah, that’s they have like three different levels. Matter of fact, you can kind of see this is the leading one, and then this is the coincident one. So coincident indicator would be something that kind of moves about the same as the economy. And you can kind of see that here, see where this peaked right at the time when the economy started into recession, for example. And then the lagging indicator. So you see, this one peaks in the middle of the, you know, actual recession itself. And so you’re coincident, I mean, sorry, Your leading indicators are going to be things like new orders for manufacturing, and initial jobless claims. As far as that goes, and this is going to be you’ll see a lot of consumer confidence numbers inside of coincidence. So they tend to have, you know, it’s not really a leading indicator, but it’s not a lagging indicator, either. And the most common lagging indicator that people would understand is actually the unemployment rate.
So when the unemployment rate peaks, it’s often you know, it’s not an indicator of continued problems with the economy, because it’s often happening, you know, kind of in the middle of those recession. So, that’s, that’s what that is. And I’ve just found that this and this is the one I focus on the most and know the most about, but I’ve just found that this particular index, which gets reported every month, is really important to follow. Again, every time I see like right now 5% down, but the indicators are up, that’s usually a buy signal. Because that means that the market is not you know, is just taking a rest in the middle of an economic you know, boom really is what’s happening here, you know, the way that this line is going, and so anyway, that that’s why I like this a lot. It just, if I see this coming down and the market coming down, you’re down 5% and the leading indicators are dropping, I would be nervous about having a bigger downturn. Definitely.