Free Stock Market Course Part 38: Economic Observation

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Chapters:
00:00 Economic Reports
02:25 Economic Forecasts
03:59 Economic Report Releases
05:17 Gap Open
06:35 Financial Media Interpretation
09:22 Good Times Bad Times
12:06 List of Economic Reports
18:19 Economic Reports: Sample Spreadsheet
20:07 Creating Clarity
Economic Observation
Module 5 Section 11
Economic Reports
Each month, numerous economic reports are released that measure various parts of the US Economy.
The reports analyzed typically focus on Macroeconomics or by looking at the US Economy as a whole.
The reports that are carefully analyzed are those that can impact the financial markets.
Economic reports reveal information about what has already happened, so they are called “Lagging-Indicators.”
However, an economic report can still have an impact on the markets:
Shorter-term initial reaction usually lasting a few minutes, or that helps set the “tone” for that day.
Longer-term trends that are discounted into the markets.
Economic Forecasts
Before each report is released, numerous economists make forecasts.
These forecasts are combined into a consensus forecast, which is discounted into the market.
The impact, either positive or negative, does not necessarily come from what is reported but from how far above, below, or inline the report is from the consensus estimates.
Economic Report Releases
Most trading days have one or more economic reports that are released.
Economic reports are usually released at 8:30 AM ET (5:30 AM PT), although there are exceptions (i.e., FOMC announcements).
Gap Open
After a report is released, this can have a short-term impact on the markets.
Typically, this can impact the open since the report was released shortly before the open of the stock market.
A Gap Open may occur for several reasons:
Geopolitical news
Domestic news
International stock market conditions
Initial reaction to an economic report
Financial Media Interpretation
The financial media will almost always try to directly correlate an economic report with the results for that trading day.
It is rarely this simple.
Making these same correlations should be avoided.
Independent conclusions should be reached based on tools used to analyze the financial markets.
Good Times Bad Times
There are times when good news is seen as good news, and bad news is seen as bad news. That makes sense.
However, there are times when good news is seen as bad news, and bad news is seen as good news.
This can change quickly but can be better understood by watching the markets closely.
Rather than applying logic to the markets, it is better to follow the market’s logic, which can vary significantly from conventional thinking or wisdom.
List of Economic Reports
The list below is not comprehensive. These are the categories of Economic Reports closely followed.
GDP
Employment Figures
Industrial Production
Consumer Spending
Inflation
Home Sales
Home Building
Construction Spending
Manufacturing Demand
Retail Sales
Economic Reports: Sample Spreadsheet
Creating Clarity
The reports that carry the most significant impact are shown in BOLD or various colors.
The “Actual” column of the spreadsheet is color-coded:
White: As expected
Red: Weaker or lower than expected
Green: Stronger or higher than expected.
An empty column means an event took place, such as the FOMC Minutes release, which caused the markets to react.
The reaction was caused by what was said rather than by the release of any statistical report.