Every month, dozens of surveys and trading indicators are released in the business news. However, being an educated investor, it’s very important to keep the finger on the pulse of the economy and indicators play a very important role in that. Mentioned below are some of the most important economic and market indicators that move the markets.
- Employment
One of the most crucial indicators of a healthy economy is employment. Every month, statistics are released on the basis of the unemployment report and nonfarm payroll. These stats indicate the unemployment rate and how many jobs are generated. Market participants wait for these reports very easily as these reports can affect the bond and the stock markets.
The reports also play an important role to influence other indicators, such as consumers’ confidence and sentiment. In the world, consumers make up around 70% of the economy, therefore it means that strengthening or weakening of the labor market can influence the economy. Basically, when people are working out, they are unable to make necessary purchases to drive corporate profits.
- Inflation
The legal instrument of the federal reserve is to promote economic growth and price stability in the economy. The stability is measured according to the rate so that the market can eagerly monitor monthly inflation reports to determine the future course of the monetary policy. Perhaps the most widely known indicator of inflation is the Consumer Price Index. The index can measure the expectancy of changes in consumer prices.
On the other hand, the Producer Price Index is responsible to measure the rate of change in inflation for the goods of the producer. If these prices are increasing, then its more likely that the company would increase the price. Marketers also make sure to keep track of the price of oil. Since it is a very essential component in the economy, it’s the price is worth paying attention to. Therefore the high price of the oil can lead to some offsetting effects. Therefore, the higher the inflation, leads to the higher the discount rate but lower project value.
- Consumers’ Activity
Changes in the level of consumers’ activities can lead to direct changes in corporate profits and the level of stock prices. There are ways to measure consumer activities like what and where they buy from can give out valuable information about the economy. Another way could be through consumers’ confidence. This means about how consumers feel about their economic prospects in the upcoming months.
Due to the forward-looking mindset, they usually end up with a gut feeling for the stock prices to reflect future opinions about the stock. Another indicator can be the housing market, whereas it is a difficult measurement on a national basis, marketers pay a lot of their attention on the building permits, new home sales, etc in order to get on a level of activity. By keeping an eye on all the housing reports, the participants can deduce whether or not the people are willing to make big purchases.
- Investors’ Activity
Market participants focus on measures of investors’ activities for market clues. Some of these clues are published by the investment or research firms which periodically poll their clients to determine market consensus. Another market indicator could be the decline or advance ratio, which indicates the health of the overall stock market and confirmation of the quality of the stock market.
Just by knowing about these trading indicators isn’t the whole thing, determining their impact is the main trick to get. The traders must learn to anticipate the reaction of the market by carefully monitoring it. Plus, hard work and persistence are very important to determine the reaction of economic and market data.
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