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The Advisors’ Guide to Key Indicators for the Current Environment

The Advisors’ Guide to Key Indicators for the Current Environment

There are a few indicators that investors can monitor. To help you make sense of the current economic climate.

These indicators may be useful in making tactical decisions, but they don’t have any long-term impact.According to Kristina Holper, chief global strategist at Invesco, the answer is yesIt is important to keep portfolios diverse across and within all three major asset classes, in order to meet investment goals.

Chinese Economic Indicators

China’s March manufacturing Purchasing Managers Index(PMI) was 49.5, which is technically contraction territory according to Hooper, down from 50.2 in Feb.

You can get additional insight into economic activity by closely following the PMIs, including the sub-indexes.

European Economic Data

The euro area Economic Sentiment Indicator indicates that the economy is at greater risk of falling into recession. It fell 5.4 points in March due to a significant drop in consumer confidence.

Hooper stated that we will follow European economic data, and especially consumer spending, since this appears to be an area where there is real weakness.

In addition, the Economic Uncertainty Indicator increased abruptly in March (up 10.7 to 25.8). Hooper says that capital spending tends to decrease when there is economic uncertainty. We will be closely following these sentiment indicators and business investments.

Geopolitical developments related to energy production

Economists and strategists are focused on the oil and natural gas prices right now, as they have such an effect on the global economy.

Geopolitical negotiation is one way to increase supply. Hooper wrote that. Geopolitical developments can push up energy prices, but they could also cause them to drop if the European Union (EU), decides not to purchase Russian energy or refuses to sell to it.

Supply Chain disruptions

The New York Fed created a Global Supply Chain Pressure Index. The most recent reading for February shows an improvement in global supply chain tensions since December 2021. Hooper stated that she expects that the March reading will reflect a worsening of the situation due to the invasion by Ukraine and COVID-related lockdowns.

Hooper states that this is a useful indicator to see how much disruption is happening in supply chains. This has implications for inflation.

Shipping Container Prices

It is important to pay attention to shipping container prices in addition to supply chain disruptions.

They reflect a range of factors, including labor costs (and labour scarcity), as well as oil prices. They can also play a significant part in inflationary pressures as higher transportation costs can often be added onto the prices consumers pay for goods, Hooper said.

U.S. Consumer Sentiment about Big Ticket Item Buying Conditions

The University of Michigan asks consumers monthly whether they think it is a good idea or a bad idea to buy major household appliances (two separate questions).

The index has fallen in recent months with a growing number of consumers saying that it is a bad time for such products to be bought.

This could be a positive sign in terms of reducing inflationary pressures. It means that households are putting off major purchases unless absolutely necessary, Hooper stated.

U.S. Inflation Expectations.

Hooper suggests following the NY Fed Survey of Consumers, and University of Michigan Survey of Consumers inflation expectation expectations, especially for longer-term goals. Although Michigan consumers expect inflation to rise in five years, they are still high, but seem relatively well anchored. However, this could change as inflation continues to rise.

See Also

The U.S. Treasury yield curve.

Last week, the 2-year/10 year U.S. Treasury yield curve was inverted This could indicate that markets are expecting the U.S. economy’s decline. Other parts of the yield curve look healthy.

Hooper suggests paying attention to the 3-month/10 year U.S. Treasury yield curve. This is because economists have used this metric historically to predict recessions.

U.S. Employment Situation

Any signifiable weakness in employment could cause the Fed to slow down its plans for raising rates later in the year. Hooper recommended that you pay close attention to whether the strength we saw in march persists or reverses.

Hooper said that if wages continued to rise at a rapid pace, the Fed could become worried about a wage-price spiral and could tighten its belt even more.

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These views and opinions are solely the author’s and do not necessarily reflect the views of Nasdaq, Inc.

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