{"product_id":"stcov313neev","title":"Stocks \u0026 Commodities V. 31:6 (38–41): News Events, Earnings, And Economic Numbers by Avi Gilburt","description":"News Events, Earnings, And Economic Numbers by Avi Gilburt\u003cbr\u003e\u003cbr\u003eLeaders And Followers\u003cbr\u003e\u003cbr\u003eNews Events, Earnings,\nAnd Economic Numbers\u003cbr\u003e\u003cbr\u003eThe stock market is considered a leading indicator of economic\ntrends. And yet traders rely on economic trends when\nit comes to placing trades. Which leads which? Heres what\nyou should focus on.\u003cbr\u003e\u003cbr\u003eIt's a commonly accepted principle that the stock market\nis the best leading indicator of future economic\ntrends. Historically, every boom in the economy\nhas been preceded by a boom in the stock market, and every\ndownturn in the economy has been preceded by a downturn in the stock market. This highlights why economists have\nearned such a poor record at predicting the direction of the\nstock market, whereas an astute market observer can predict\nthe direction of the economy. Theres a reason economics is\nknown as the dismal science. A January 30, 2013 article on\nthe Wall Street Journal blog titled Why Did Economists Get\nGDP Wrong? states that none of the 24 economists surveyed\nforecast a negative GDP for the fourth quarter of 2012. This is\nnothing new. In September 1996, an article in Business Week\npointed out that over the past 25 years, economic forecasters\nhave missed four of the five past recessions. A quote commonly\nattributed to economist John Kenneth Galbraith but which may have first been said by economist Ezra Solomon\nsums it up well: The only function of economic forecasting\nis to make astrology look respectable.\u003cbr\u003e\u003cbr\u003eCommon scene\u003cbr\u003e\u003cbr\u003eIf the stock market is the best leading indicator of economic\ntrends, why do we see the same scenario play out time and\ntime again? Heres an example.\u003cbr\u003e\u003cbr\u003eSay its 8:25 am on a Thursday, and many market participants\nare glued to their televisions watching CNBC or Bloomberg\nwaiting, with bated breath, for the latest deluge of economic\nreports to be released. At 8:29 am, they have their finger on the\ntrigger, expecting to make a trade based on the news releases.\nAt 8:30 am, the numbers are released.The numbers arent\npositive and dont point to economic growth. The investors\ninitial reaction is that they will have to hit the sell button. But\nwait! The market is starting to move up, and it is even doing\nso explosively. How is that possible? The numbers were\nshowing economic contraction, but the market is going up!\u003cbr\u003e\u003cbr\u003eHeres another scenario. How many of us have watched\nthis scene play out when it comes to Fed watching? The\ncommon argument of Fed watchers is that when the Fed (US\nFederal Reserve) injects money into the system, the stock\nmarket goes up and the US dollar goes down. So why, at the\nannouncement of Operation Twist in late 2011, did the stock\nmarket sell off? Well, the newshounds will tell us that it was not\nas much money injected into the system as the market wanted.\nBut then why did the US dollar begin a strong rally right after\nthat announcement following a protracted multiyear decline?","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52134140150129,"sku":"V31C06_564GILB","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_f9cb5129-91c8-4f87-9d8d-2083a2575c6f.jpg?v=1739668673","url":"https:\/\/shop.traders.com\/products\/stcov313neev","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}