Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks for having me, Brandy.
Brandy Auterson-Hurst:
So we often hear about economic data either beating or missing expectations in the financial news. Can you explain what this means and how you interpret these events?
James Nelson:
Sure. So every month we get a flood of data and it’s a lot of different economic reports. These reports show how the economy’s really performing. These are reports like jobs, inflation, manufacturing, retail, all of those type of reports. And what Citibank has done is they’ve developed a tool it’s called the Economic Surprise Index, that tracks the economic data compared to what analysts’ expectations are. So that’s the chart that we have here today. And the blue line shows this index over the last 10 years. When the actual data comes in better than expected, it contributes positively to the index resulting in an index above zero. And on the flip side, when data performs worse than expectations, it’s a negative result and it’s below zero. What’s interesting is that this index has been trending lower since last summer. It flipped to an outright negative in August of 2022, and this is a sign that various parts of the economy are starting to show some slowing and the surprise index has dropped along with that.
Brandy Auterson-Hurst:
So what implications could this have for viewers’ investments?
James Nelson:
There’s historically a strong relationship between the Economic Surprise Index and weak stock market performance; so now that we’re seeing that negative, that’s not great for the stock market. With that being said, the weaker data though could ease some of the inflation problems that we’ve had recently and may be a positive for stocks in the short term.
Brandy Auterson-Hurst:
All right, James. Thanks for your insight today.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.