What the Numbers Are Saying About the US Economy

Tweed-Economics-US-Economy
Tweed-Economics-US-Economy

President Donald Trump inherited an economy with an admirable trajectory, thanks to solid job growth, low unemployment and sound economic fundamentals. However, in the last one year job gains and wage growth have been less steady. This has fueled talk on whether the US economy is bouncing back or losing steam two years after Donald Trump took over the reins of leadership from President Barack Obama. According to NBCNews.com, the US economy created 196,000 jobs in March 2019, beating the 175,000 forecast that analysts had projected.

Figures

This figure was a big leap from the dismal 33,000 jobs created in February. The worrying job statistics sent jitters across Wall Street, but the White House dismissed it as an outlier instigated by the 5-week long government shut down and a string of bad weather. The drop raised fears that the Federal Reserve could step in to rein in the interest rate as it did in 2018 when it announced an unprecedented four rate adjustments. President Trump was among those who decried the adjustments. The 3.8% unemployment rate recorded in March was the lowest in 50 years.

Wages

According to the Bureau of Labor Statistics (BLS), the wages took cue with a 1.14% rise, which was an impressive 3.2% year on year growth. It will be remembered that the US economy created 225,000 jobs monthly in 2018. Economists expect the economy to ease somewhat this year as the President’s $1.5 trillion fiscal stimulus package doubles down. The tweaking of the economy follows the tepid growth being witnessed around the world. Fears have also been raised regarding continued trade spat between two global economic powerhouses, the US and China.

Leadership

In spite of the uncertainty, there is a reason to believe Trump has a lot to with the economic vibes reverberating across the country. According to a USA Today report published on October 2018, economic growth under Trump averaged 2.9% at the time. The Trump’s economy has also added 3.6 million jobs and pushed the unemployment rate down to 3.9% from 4.8% when he took over as president. It should be noted that people of color, including Latinos and African Americans are witnessing some of the lowest unemployment rates in decades.

Small Business Owners

Lots of optimism is also coming from small business owners. Another key indicator of fair economy is the 3% growth in real disposable income that is up from a flat rate under Obama’s presidency. In spite of the prevailing positive outlook, some analysts say it is too soon to make conclusive proclamations regarding Trump’s initiatives in the wake of hot button issues like taxes and regulatory cuts. There is also nervousness as to whether the growth will be sustained over the coming years. Optimists are pointing to growth in government spending as a sign of a strong future.

Government Spending

The government spending rose to 7% over the 2017 figures, which shows the GDP is growing and might maintain the momentum. On the downside, the deficit is expected to hit $1 trillion and the national debt, a staggering $30 trillion by 2025. Matters might come to head if the debt begins to pull down the economy. The other fears come from Trump’s tough immigration stance and trade policies. As workers, employers and poly makers ponder over the future, there are a few fundamental questions that need to be asked to gauge the health of the economy.

Tax Reforms

According to Forbes magazine, stakeholders need to question how much growth the tax reforms will generate and what Trump’s trade agreements like NAFTA portend for the economy. The answers to these questions will go a long way to impact economic growth and the direction of the stock market indices. The magazine lists the key indicators for assessing the US economy as:

• DOW 30 and S&P 500 Index

• GDP growth figures

• Monthly and annual jobs growth

• Manufacturing jobs growth and future outlook

• Unemployment rate

• Growth in hourly wages

• Federal deficit

• Trade deficit

Reading Economic Indicators

The performance of key economic indicators can make or break investor confidence and investment prospects. Rusty Tweed has spoken and written many articles about market indicators. The highly regarded economist recently commented about the housing market, specifically how the rising market can affect the sector the stock market.

His assertions centered on financial institutions lending and interest rates; the imbalance in the housing supply and demand and the impact of higher down payment and its repercussions on real estate investors. Tweed sees an eerie correlation between investment in the housing sector and stock market. For instance, investors are often drawn to a rising market, but fall back on their positions when things begin to look down.

Market Indicators That All Finance Experts Should Be Looking At

Tweed-Economics-Market-Indicators
Tweed-Economics-Market-Indicators

Finance experts have to look at a wide variety of metrics to do their jobs and properly understand trends in the economy. They have to be aware of both macroeconomic and microeconomic factors at the company level in order to make these analyses. Here are three of the most critical market indicators that any financial expert should know in order to do their jobs.

Volatility

Volatility is perhaps the most important factor that any financial expert should know. This concept is the clearest way to understand how an individual can predict the movements of financial markets. Volatility is measured by the VIX index and other factors. In many ways, volatility is more damaging than a simple downturn in the market. Financial experts know how to transfer their assets and pick counter-cyclical industries if they see that a downturn is coming.

They are not able to make those same bets if there is a considerable amount of volatility in one or more sectors. Knowing volatility is helpful for understanding what factors influence the decisions that financial experts make. One decision that many experts have to make is whether or not they want to take short-term or long-term positions in securities.

Having a short-term outlook may push financial experts to recommend more short sales and limits on trades. Financial experts also may focus more on the bond or real estate markets than stock markets at times of high volatility. High volatility often means a greater chance of losing money for anyone invested in the stock market. Times of steady growth are the best possible times for investment and often do not go along with high ratings on the VIX index.

Value Pprojections

Value projections are the most common market indicators that most individuals use to understand markets. They are the essential facts behind the performance of companies. Most companies release a wide variety of statistics about their performance over the previous year or quarter. But they also issue predictions about how those same companies will perform over the next year. These predictions are more informative to a financial expert than the previous year’s numbers because they help show expectations and assumptions by professionals from a wide variety of companies.

Expectations and assumptions about trends in the market drive the market more than almost any other fundamental. Financial experts can buy, sell, and hold based directly on these predictions. Their job is to show the predictions that matter and the predictions that are based on poor forecasts or guidance. By picking the most influential ideas about the performance of the stock market, a financial expert can use value projections to greatly aid their analyses.

Real Estate

Financial experts need to make sure that they are considering other asset classes outside of bond and stock markets. One of the most common other asset classes to consider is real estate. A wide variety of new, used, individual, and commercial real estate metrics is released every month. This information can point to the success of consumer spending and the economy in general. Real estate is vastly more influential than information about nearly every other industry. Buying a home is often the most consequential purchase that any family will make. It involves a transfer of hundreds of thousands of dollars over a period of years or even decades. As a result, moves in this market show the financial ideas and security of millions of Americans.

Every financial expert needs to become as familiar with this market as with any other. They need to better understand how the real estate market influences the amount of money that individuals spend on technology products and staples. In addition, financial experts need to learn the amount of time it takes for moves in the real estate market to translate to moves in equities markets. Such an understanding is critical for financial experts to make recommendations about the prices of stocks or the performance of the bond market.

No finance expert can perfectly predict every movement of the market. But following critical financial indicators can help ensure that an individual is as informed about markets and market developments as possible. Knowing about volatility and other asset classes helps experts stay informed and make financial plans that are likely to generate considerable returns over a period of time.