Tips On Tracking Economic Performance
Building an economic tracker can be a daunting task, here are a few tips to keep in mind before you do.
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
We have a quick question from a subscriber saying they are planning to go into a lot more detail in their fundamental analysis by building out an economic tracker, and wants some tips on how they can go about it.
Thanks for the question, in my opinion if you are serious about building something like an economic tracker I think it can add another level of depth to your analysis, as long as you know how to use the data of course to make better trading decisions.
A good example of what I mean by this has been the onslaught of covid-19 on the world, with economies around the world in full national lockdown with business shut down and economies grinding to a halt, it meant that the usual data we look at to track economic progress has been less important, if you take a look for example at something like a PMI, because they are diffusion indexes they saw some wild fluctuations over the past couple of months, if you take something like the ISM MFG PMI that bounced from 43.10 in May to 52.60 in June, or look at NFP above which went from 251K jobs gained to -1.3 million jobs lost to a whopping -20 million jobs lost and then bouncing with numbers of +2 and +4 million two months later.
So, when you are taking on the endeavour of building and economic tracker make sure that you understand it’s limitations. Not only for events like covid that skew data, but also due to the various other factors that affect asset prices. Remember that the stock market for example is not the economy, this can be all red as it was back in April and stock can rip higher in the midst of that, so yes of course use the data is a crucial part of your fundamental analysis, but always keep the other factors in mind that might skew the data.
Now, this example of my personal econ tracker might be a bit too ambitious because I wanted to make it as thorough as possible, and one important thing to add to this is that this probably isn’t the type of thing that you want to do update manually as the data comes out, I for example use MetaStock Xenith as my data source and if you look on this sheet here you will see the Xenith formula that pulls of the data in for me, and then on the tracker sheet I just cleaned it up with some formatting to make it look a bit more exciting.
Also, another tip, is make sure that you have an idea of what you want to use the data for, for me my aim was to track various parts of each economy with the aim of using the rate of change of the data, as evident in the colours, to plot possible divergences between major economies, and to use that as an additional analysis tool to try and front-run potential asset class movements for the relevant country I’m looking at, so with that overall idea in mind I knew, well roughly knew at least, how I wanted the end result to look, of course I didn’t get it right the first time but having a clear plan in mind with where you want to take your tracker will give you some well-needed guidance and help later on, trust me on this.
Now, if you are just looking to track the major data points for each economy that can also be a good idea as a way to strip out and make it a bit more concise, so with that you can opt for only the most important three metrics like inflation, growth and employment, and you would ideally want to put more focus on the forward looking indicators where you can, for example in the US your GDP in quarterly and by the time you get the first estimate the data matters much less, so for things like growth focus on the big fish, again if we take the US as an example focus on things like the ISM’s, industrial production, retail sales etc, basically making sure you don’t choose things that won’t really be very handy for you like a quarterly GDP print by the time you finally get it.
So, I hope these tips has been helpful for you, and other questions just let us know.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
We have a quick question from a subscriber saying they are planning to go into a lot more detail in their fundamental analysis by building out an economic tracker, and wants some tips on how they can go about it.
Thanks for the question, in my opinion if you are serious about building something like an economic tracker I think it can add another level of depth to your analysis, as long as you know how to use the data of course to make better trading decisions.
A good example of what I mean by this has been the onslaught of covid-19 on the world, with economies around the world in full national lockdown with business shut down and economies grinding to a halt, it meant that the usual data we look at to track economic progress has been less important, if you take a look for example at something like a PMI, because they are diffusion indexes they saw some wild fluctuations over the past couple of months, if you take something like the ISM MFG PMI that bounced from 43.10 in May to 52.60 in June, or look at NFP above which went from 251K jobs gained to -1.3 million jobs lost to a whopping -20 million jobs lost and then bouncing with numbers of +2 and +4 million two months later.
So, when you are taking on the endeavour of building and economic tracker make sure that you understand it’s limitations. Not only for events like covid that skew data, but also due to the various other factors that affect asset prices. Remember that the stock market for example is not the economy, this can be all red as it was back in April and stock can rip higher in the midst of that, so yes of course use the data is a crucial part of your fundamental analysis, but always keep the other factors in mind that might skew the data.
Now, this example of my personal econ tracker might be a bit too ambitious because I wanted to make it as thorough as possible, and one important thing to add to this is that this probably isn’t the type of thing that you want to do update manually as the data comes out, I for example use MetaStock Xenith as my data source and if you look on this sheet here you will see the Xenith formula that pulls of the data in for me, and then on the tracker sheet I just cleaned it up with some formatting to make it look a bit more exciting.
Also, another tip, is make sure that you have an idea of what you want to use the data for, for me my aim was to track various parts of each economy with the aim of using the rate of change of the data, as evident in the colours, to plot possible divergences between major economies, and to use that as an additional analysis tool to try and front-run potential asset class movements for the relevant country I’m looking at, so with that overall idea in mind I knew, well roughly knew at least, how I wanted the end result to look, of course I didn’t get it right the first time but having a clear plan in mind with where you want to take your tracker will give you some well-needed guidance and help later on, trust me on this.
Now, if you are just looking to track the major data points for each economy that can also be a good idea as a way to strip out and make it a bit more concise, so with that you can opt for only the most important three metrics like inflation, growth and employment, and you would ideally want to put more focus on the forward looking indicators where you can, for example in the US your GDP in quarterly and by the time you get the first estimate the data matters much less, so for things like growth focus on the big fish, again if we take the US as an example focus on things like the ISM’s, industrial production, retail sales etc, basically making sure you don’t choose things that won’t really be very handy for you like a quarterly GDP print by the time you finally get it.
So, I hope these tips has been helpful for you, and other questions just let us know.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
